Much-needed good news
In the midst of all the negative news in the air, I thought a good-news story would be welcome. The turnaround in performance of government-owned or -controlled corporations (GOCCs) is like a well-kept secret that deserves to be revealed and appreciated. While GOCCs are now strong contributors to the fiscal health of our country, it was not too long ago that they were cesspools of corruption, with political appointees holding cushy, lucrative leadership positions and receiving excessive compensation regardless of their performance.
Board members of the Government Service and Insurance System (GSIS) used to receive P500,000 per month for attending board meetings every two weeks, not including bonuses! Executives of the Metropolitan Waterworks and Sewerage System received bonuses amounting to 25th-month pay, including three different forms on Christmas. These amounts, combined with opaque guidelines on how bonuses were determined, led to executive compensation in GOCCs being far higher sometimes than in the private sector. Bonuses were paid even in years when the GOCCs incurred losses. The result was lower income for dividends and an attraction to corrupt individuals who saw GOCCs as a gold mine.
President Aquino recently announced that the GOCCs turned over P32.3 billion in dividends to the National Treasury in 2013 largely as a result of competent management and good governance. Since the start of the Aquino administration, the National Treasury has averaged P27.25 billion in dividends from GOCCs per year, over three times more than the average P9.06 billion per year during the previous administration. Bear in mind that Republic Act No. 7656 requires GOCCs to declare and remit at least 50 percent of their annual net income as dividends to the National Treasury.
The President signed the GOCC Governance Act of 2011 into law in June 2011. The key feature of this law sponsored principally by Sen. Franklin Drilon is the creation of a Governance Commission for Government-Owned or -Controlled Corporations (GCG) to serve as “a central advisory, monitoring and oversight body with authority to formulate, implement and coordinate policies” over 158 GOCCs which had combined assets of over P5 trillion upon implementation. To ensure that the GCG has appropriate enforcement power, the chair, currently Cesar L. Villanueva, has a rank equivalent to a Cabinet secretary; the finance secretary and the budget secretary are both ex-officio members.
The GCG has implemented numerous policies, including measures to limit excessive compensation received by trustees and board members to strengthen transparency and accountability in the governance of GOCCs. Executive Order No. 24 standardized pay and benefits while also aligning compensation with the private sector. Performance-based incentives were limited to 50 percent of standard salary to prevent incidences of graft and corruption. The GOCC Act also requires each GOCC to maintain a website that allows access to audited financial statements, performance reports and information on compensation packages and expenses of all board members and officials. The GCG is also mandated to abolish, merge or privatize nonperforming GOCCs with the goal of reducing the number of actively monitored GOCCs to 100 by the end of this year.
I think that the achievements of the GCG thus far are clearly laudable, and we should commend the President that his efforts to fight graft and corruption have indeed significantly improved the performance of GOCCs.
In the case of the GSIS, not only has its financial position dramatically improved in the last few years, it has also earned an “Excellent” rating from the Civil Service Commission and an “unqualified opinion” from the Commission on Audit. Equally important, the GSIS was able to service more than P80 billion in insurance claims, pensions and retirement benefits in 2013 with no increase in members’ contribution in the past three years.
The GSIS was able to effect this turnaround with the appointment of the highly respected Daniel Lacson, former governor of Negros Occidental, as chair, and Robert Vergara, formerly a fund manager in Hong Kong, as president. The GSIS is being managed professionally, with clear guidelines on expectations and compensation, so that the executives are appropriately motivated while eliminating opportunities for corruption.
The efforts of the administration to improve transparency in GOCCs should translate into greater confidence from a discerning citizenry that now demands greater accountability from public officials. Leadership in the GOCCs has been improved with professional management under clear performance management guidelines. This performance-based compensation serves to motivate management to provide the high quality of public service expected of them by taxpayers.
Too often, it seems that doing the right thing must come at considerable cost. It is refreshing to see that at least in the case of GOCCs such as the GSIS, doing the right thing results in clear benefits. The remitted dividends augment funds for social services such as healthcare and education, or infrastructure development; they are also used to help rebuild communities devastated by calamities.
The best part of the story is that the GSIS is not alone in demonstrating superior performance. The Social Security System and the Development Bank of the Philippines and some other GOCCs have much the same story to tell. In stark contrast to their past, the major GOCCs now stand as exemplars of good governance.
Congratulations are in order.
Ramon R. del Rosario Jr. (rrdelrosario @gmail.com) chairs the Makati Business Club.
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