Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Limit Government Corporation Salaries

Posted by butalidnl on 17 August 2010

President Noynoy Aquino made a big issue of the excessive bonuses paid to the board of the MWSS during his recent State of the Nation Address (SONA). It seems that there are a lot of other government corporations which also pay their boards quite richly. Is there a way to limit the pay of these people? How high should their salaries and bonuses be, then?
One angle that the Senate is looking into is whether these Government Owned and Controlled Corporations (GOCCs) comply with RA 7656, which require GOCCs to remit at least 50% of their annual net earnings to the government. Apparently, some GOCCs are not remitting their earnings, and have funneled these instead to their own pockets, by way of bonuses and other benefits to their managers.
But, if we take aside the issue of whether or not a GOCC is remitting its earnings to the government, there should still be a limit on the salaries of their executives. The question of what constitutes excessive pay needs to be answered.

I  suggest that limit for the compensation for GOCC executives, should be the salary that the president receives himself. It should be reasonable enough to establish the salary of the president as the maximum “norm” for government salaries. After all, as the chief executive of the country, he should be the highest paid government official. But, how will this work when the boards of MWSS and other government corporations and institutions are governed by their own charters?

The Netherlands
In the Netherlands, there is a “norm” regarding how high the salaries of publicly owned corporations can be; and this is the salary of the prime minister. This norm is called the “Balkenende Norm”, which is the name of the current prime minister, and who earns about Euro 188,000 per year. However, the government could not impose this as a formal limit, . So, the Dutch parliament passed a law requiring the publication of the list of government officials (as well as officials of government owned or controlled corporations) who earn more than the Balkenende norm. And, since this law was passed in 2006, there has been immense public pressure put on those who do earn more than the premier, but who don’t really deserve to (according to the public, that is). This has led to many managers being forced by their boards to return “excessive bonuses”.

In the Netherlands, people accept that people like the head of the Central Bank, the AFM (equivalent to the SEC) and other financial regulators, need to be paid high salaries; because, otherwise, you will not be able to get the most qualified people for these jobs. But they frown upon some hospital directors (these are public corporations here) who get higher salaries than the prime minister, for instance.

“P-Noy Norm”
In the Philippines, I think it would be a good idea to have a “PNoy Norm” , which will set the president’s salary as the norm for the highest salaries in government. The Congress should also pass a law requiring all officials (especially those from GOCCs) who earn more than that to declare how much they earn, and that this should be published in the internet and in other media. This way, the public will have the possibility to assess whether these officials deserve such high salaries.

The PNoy norm should be set above the president’s nominal salary. After all, he has some non-salary benefits e.g. free lodging in Malacanang, free travel, etc. So, let us say we put the norm at Php 1.8 million a year (Php 150,000 a month), and this would include salaries, bonuses and other fringe benefits. So, GOCC executives earning more than this should declare it.

The government could put this norm in effect simply by the power of an Executive Order.  And, and the same time, the president could set up a commission to review the salaries of all executives who receive more than the “P-Noy Norm”. And I am sure that public pressure will come to bear on officials who receive more than the PNoy norm, but who cannot justify such a high level of compensation.

And of course, the Senate should continue with its investigation of whether funds which should have gone to the government have instead gone to the pockets of GOCC managers.

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