Peg to performance or use private sector yardstick?

While blue collar workers are in uproar over the salaries being paid to executive chairmen and chief executive officers (CEOs) of state enterprises, hard-core business people are of the view that such salaries need to be paid to get the right people to run these organisations.

Still, Arthur Lok Jack, executive chairman, Associated Brands Ltd indicated that private sector salaries are usually based on performance. “Depending on the financial metrics used, persons are paid on profit margins, and return on investment,” he said. However, he said this does not happen in the public sector. “I think people running public sector companies should be paid salaries that are on par with private companies. Their salaries should be around the same area otherwise all the best persons will go to the private sector and the worst to the public sector. It is a competitive market out there.”

Last week, it was revealed by Energy Minister Eric Williams that Petrotrin’s chairman Malcom Jones is receiving a monthly salary of $70,000 per month plus perks: a performance bonus of 16 percent of annual income; a fully maintained company vehicle with the option to purchase the vehicle at the end of his three-year contract period; a fully maintained and furnished company house; full participation in the company’s medical plan; 25 working days vacation per year of contract and gratuity of 30 percent of his basic salary payable on satisfactory completion of the contractual period. WASA’s CEO Errol Grimes also came under public scrutiny when it was disclosed that he was working for a salary of $50,000 per month, plus perks.

However, his salary was reduced to $36,000 after an investigation by Prime Minister Patrick Manning who said Cabinet had not approved a salary of $50,000. Anthony Hosang, president, Trinidad and Tobago Manufacturers Association (TTMA) is of the view that Jones is receiving a fair salary. “In order to get state enterprises to become more efficient and effective you have to hire the right people with the right balance of education and expertise.” He added that some chairmen on state enterprises work for less than those in the private sector, explaining that if Government wants to get these “experienced, highly skilled” people away from the private sector to work for them, it will have to match or exceed the salaries being paid in the private sector. 

Williams defended Jones’ pay package, saying that it had dropped from $82,656 to $46,200 between December 2001 and December 2002, when he left the private sector to re-enter the public sector. Titan Methanol had assessed Jones’ worth as “deserving of superior compensation.” Hosang noted that the stipend paid to Board members on some of these state enterprises is ridiculous. Directors on the Betting Levy Board (BLB) receive a monthly stipend of $600 per month, while its chairman gets $1,100. NFM’s CEO, Michael Potella, also earns much less than Grimes and Jones. He is not accorded a housing allowance or a furnished house. “Nine out of ten times people on state enterprise boards are very skilled people and as such deserve to be paid properly,” said Hosang.

According to the HRC Associates 2001 Compensation Report, the average basic salary for CEOs in the gas, oil and utilities sector was $44,520, while CEOs at the higher end of the spectrum got around $73,210. “What has to be taken into consideration though, is whether proper employment practices were considered in hiring these people,” said Hosang. Trade and Industry Minister Ken Valley said Jones compensation package was not approved by Cabinet. However, Williams insisted that a proper procedure was followed in fixing the $70,000 a month salary. President General of the Oilfield Workers Trade Union (OWTU) also defended Jones. “I would defend any decent remuneration package for quality of work in the energy sector.” He added that he will not argue against $70,000 in the “key oil and gas sector.” He reminded everyone that it is the oil sector which has carried the country’s economy throughout the years.

“CEOs in the public or private sector are paid according to their talent,” said former independent senator Diana Mahabir-Wyatt. “Salaries,” she continued “are based on performance of the company and its potential future and also the person’s talents.” Mahabir-Wyatt is also a human resource consultant and head of Personnel Management Services Limited (PMSL). Mahabir-Wyatt also noted that salaries are also determined by the pool of qualified persons from which they choose. “There are not a lot of CEOs with technical and managerial skills in TT. Therefore we have to retain local people by paying them what they will earn on the international market.” Richard Young, managing director, Scotiabank and president, Bankers Association of Trinidad and Tobago (BATT) said if an organisation want to attract “good and correct” people, it has to pay competitive salaries.

However, he said there should be a performance mechanism in place to ensure that the individual’s performance is in line with compensation. “Although an organisation may not perform as expected because of many reasons, not necessarily because an individual is not competent to handle the business.” Young explained that in WASA’s case, the organisation can make a profit if it increases its rates, but could face severe criticism. “The nature of WASA is totally different from Petrotrin.” He added that in the energy sector there is a shortage of skilled personnel and as such if Government wants to attract locals, it has to present a very competitive pay package. UWI economist, Dr Dhanayshar Mahabir said there was no due process in choosing the accurate candidates for the posts, and believes that both Jones’ and Grimes’ pay packages are excessive.

“I suspect that there was no due process because I did not see any ads in the newspapers advertising the vacant posts therefore I believe that these salaries are excessive.” Mahabir said if there was no due process involved in choosing the right candidates for the post, TT might not be getting the best talent to run these organisations. “The issue here is about transparency in choosing the right candidate through the right process. But, unfortunately in TT, CEOs and chairmen of state enterprises are chosen by a pool of individuals who belong to a particular political party.” He said if due process was involved in choosing these candidates, Government needs to show the evidence.