Press Release
October 14, 2010


Members of the governing boards of state enterprises will be made to refund to the state agency they represent the excessive compensation and bonuses they received from private corporations if Senator Franklin Drilon's bill is passed into law.

Drilon, chairman of the Senate Finance Committee that conducted an investigation on the excessive pay and perks being enjoyed by the board of directors and trustees of state enterprises, on Wednesday filed Senate Bill No. 2566 that aims to impose a limit on per diems, allowances and bonuses the directors and trustees receive.

The directors and trustees are entitled to bonuses equivalent to not more than two months salary of the chief executive officer of the government-owned and controlled corporation (GOCC). Profit shares, stock options, stock dividends and other similar offers or grants from corporations where the GOCC that they represent is an investor should be held in trust in favor of the state firm.

"The monies that they are receiving should be made as part of the earnings of the state firm. They should not take it upon themselves to be entitled to gargantuan amounts, even if they had used their own money in exercising their stock option," said Drilon, principal author of SB 2566 or the GOCC Governance Act of 2010, arguing that the officials could not have exercised their option if not for the investment of the state firm that they represent.

Drilon had denounced the "abuses" of officials of state enterprises, despite executive issuances and laws that required the approval of the President on the declaration of bonuses. For one, Memorandum Order No. 20 issued by former President Gloria Macapagal-Arroyo in 2001 imposed as a ceiling on compensation on the heads of GOCCs an amount which is double the salary of a Cabinet secretary, but Drilon said this has never been followed.

Furthermore, certain state firms have not complied with their obligation to remit 50% of net earnings to the national government in accordance with Republic Act 7656 or the Dividends Law of 1994.

Drilon filed the proposed legislation in a bid to curb the excesses of state officials and address the seeming lack of sustained effort of the government to closely monitor the performance of GOCCs, a number of officials of which have been on a spree as regards the "obscene" bonuses that they have been receiving.

The senator particularly cited former Social Security System (SSS) chairman Thelmo Cunanan, ex-SSS president Romulo Neri and SSS commissioners Sergio Ortiz-Luis and Corazon dela Paz-Bernardo who realized a combined P92.818 million from exercising their stock option alone as directors of Philex Mining Corp.

"It is anticipated that the lack of centralized monitoring and supervision of the management and operations of the government-owned and controlled corporations will further result in the substantial and continued depletion of state funds without maximizing the potential of GOCCs to achieve their mandates under the Constitution and their charters," Drilon said.

Likewise, the measure also mandates a new remuneration system for directors, trustees and employees of GOCCs, which will be recommended by monitoring body to be known as the Governance Council for GOCCs. However, the ratio of compensation for those occupying higher ranks to those at the lower ranks should be maintained at equitable levels, giving due consideration to higher percentage of increases to lower level positions and lower percentage increases to higher level posts.

No exemptions will be made for state firms from the coverage of the new compensation scheme, and in no case shall there be any decrease in the salaries of incumbent employees of state-run enterprises who are covered by Republic Act 6758, as amended, upon the implementation of the Compensation and Position Classification System for state firms.

The monitoring body may also recommend, subject to the President's approval, additional allowances for certain position titles, giving due consideration to the necessity for such allowances and the good performance of the state enterprise.

The advisory, monitoring, recommendatory and policy-enforcing body that would be an attached agency of the Office of the President is also authorized to recommend to the President the reorganization, merging, streamlining, abolition or privatization of state firms following a performance evaluation.

"With the passage of this bill, it is anticipated that the GOCCs will operate profitably, efficiently and significantly contribute to the income of the state thereby improving the quality of public services rendered and substantially contribute to the national development," Drilon said.

Under the proposed legislation, the council shall be composed of the Budget Secretary as ex-officio chairman, Finance Secretary and the Socioeconomic and Planning Secretary as ex-officio members, and two representatives from the private sector as appointive members.

Drilon said he will conduct a hearing on the measure when session resumes on November 8.

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