Salaries for a Capable and Committed Government

Sir, ask 10 different people how much they think their political leaders should be paid and you are likely to get 10 different responses. Sir, that was my experience when I consulted Singaporeans in the public, private and people sectors through desktop research, face-to-face discussions and polls.

To the passionate who are fighting for causes they deeply believe in, sacrificing part or all of their salary is not an issue. To the low-wage worker who earns $5 an hour, a million-dollar pay is unimaginable. To a PMET (Professional, Manager, Executive or Technician) earning the median Singapore income of less than $3,000 per month, the million-dollar pay is an unattainable dream.

There are others who are concerned with the Golden Parachute effect of entrants to politics who enjoy big windfalls in pay although they had no prior appropriate leadership experience. Yet to some others in the private sector, the Ministers’ pay is a bargain, compared to the typical $3 million to $7 million annual CEO packages of local banks, telcos and others. On the ground, someone quipped that the annual pay of a specific local CEO, which in a good year can skyrocket to $20 million, could pay for more than half the Cabinet. The Straits Times reported recently that the annual incomes of even second tier senior executives in some big local companies amounted to between $1 million and $2 million.

Sir, the mixed reactions reminded me very much of the parable of "The elephant and the six blind men". Each man described the animal according to the part of the elephant he was touching. And according to the poet, John Godfrey Saxe’s poem of the same parable, all men "disputed loud and long". The truth of the matter is that all of them are right except that each view is but a partial view. The same can be said of Singaporeans’ descriptions of the Ministerial pay issue. The disputes are similarly "loud and long", and Ministerial pay is one of the most divisive subjects in our country. To heal our land, it is critical that each one of us takes the time and be open enough to find out and accept that there are other perspectives.

On leaders who are worth the millions: when the subject of Ministerial and Top Civil Servants’ pay was debated upon in April 2007, I was very uneasy. Till today, I believe that there are successful people in Singapore who are willing to put aside their corporate perks and power suits to serve in a cause they believe in.

Sir, five years on, I have learnt to recognise my view, like the blind men describing the elephant, is but one perspective based very much on my own values and season in life. Mind you, there are indeed people who would still give up successful careers to do what they believe in. In fact, just last week, another young banker hung up her corporate suit and joined the charity I run. But there are not enough of them. I could not find enough of them who had the right mix of passion and technical and leadership competencies I need to help me construct our dream 21st century charity and special schools. Finally, through a mix of monetary and non-monetary measures, such as culture-building, we were able to attract and retain barely enough talents to sustain our rapid growth in the sector that I work in.

Sir, I can imagine how the challenge of attracting sufficient people with the right character and skill sets to enter politics is multiplied. The "new-normal" political culture appears to call for "superhero" politicians who are an even rarer species. Ideally, the political leaders of the future should be able to:

(1) inspire our people (especially those who have options to leave our country) to not only physically stay on but also actively construct our dream country together;

(2) connect and engage their constituents both face-to-face and in cyberspace;

(3) facilitate, gather differing perspectives and resolve multi-faceted issues with stakeholder groups who sometimes have opposing interests;

(4) harness continued support of their constituents and team members and do well at the polls; and to me, most importantly, my dream politician should be able to exercise not only courage to question but also have the skill sets to provide solutions and exercise reforms in sacred-cow areas which are complex and deeply entrenched in our country; that if nothing were done about them, will lead our country to demise.

I am talking about the complex challenges, such as (a) trimming the $700-million tuition industry which appears to be a grudgingly accepted feature of our education landscape; (b) the creation or re-designing of jobs to elevate the incomes and dignity of vulnerable citizens, such as the elderly, the disabled, the lowly educated; and (c) the potential of transforming private enterprises in essential services, such as public transport to social enterprises.

Sir, the Ministry of Education has developed a framework of the 21st century competencies essential for the survival of our students; our political and Government leaders need the framework, too. The dream leaders who are closer to the ideal profile I just described are worth many millions. That is the additional perspective I wish to offer to the topic of the Ministerial pay review.

Sir, I would like to turn now to the specifics of the Report on the Ministerial Pay Review, from my leadership and HR professional’s perspective. Sir, I hold this glass of water in my hand [indicating]. Is it half-full or half-empty? Some of us optimists will say it is half-full. Others, who are less positive, will say it is half-empty. The cynics amongst us will wonder who drank the other half. I say it is both. It is half-full and half-empty. And that is my assessment of the report.

Although I do not completely agree with the recommendations carried in the Report of the Ministerial Salaries Committee, I cannot, in good conscience, say that the Committee has done a poor job. By boldly recommending pay slashes of up to 50%, measures which are hardly cosmetic, the Committee has moved in the right direction. Like many in Singapore, I thought it was important that if reference was drawn from what I felt was a more punishing private sector in terms of pay and accountability, then it was only right that common compensation principles in that sector be applied. I am heartened that some of the recommendations I made in April 2007 were considered and applied and, in some cases, enhanced:

(1) An independent and external Salary Review Committee was set up for the first time, so that executives do not write their own paychecks;

(2) The line of sight linking an incumbent’s pay to his performance is now clearer;

(3) The previously simplistic link of bonus to GDP growth rate is now expanded;

(4) The salary benchmarking formula now targets a much bigger group of 1,000 instead of 48 top wage earners; and

(5) Keeping the annual base pay package to comprise only monthly salaries and a 13th month bonus by removing items such as Special Allowance, Public Service Leadership Allowances, so forth, is a much more acceptable compensation practice, amongst others.

Sir, to help further fill up the glass, I would like to offer five additional recommendations.

Recommendation 1: to peg political pay to a broader base of income wage earners and discard the discount feature. The proposed salary benchmark of the entry level Minister is now pegged to the top 1,000 wage earners, instead of 48, in Singapore. A discount of 40% is then applied.

Sir, the selection of the 1,000 top wage earners, albeit more reasonable, is still arbitrary and still smacks of elitism because the base is about 0.05% of the workforce, assuming a workforce size of two million. The application of the discount – whether the current one-third or the proposed 40% – is also arbitrary and often forgotten and unappreciated.

I propose that political leaders’ pay be pegged to a simple top percentile income bracket, for example, 10% or 20% of Singaporeans. Then discard the discount feature. A quick poll I conducted revealed that many Singaporeans are likely to understand and accept that their political leaders belong to the top 10%-20% income bracket in our country. So, a simpler formula.

Recommendation 2: to further strengthen the line of sight between pay and performance. Let us remove one of the three components of the Variable Pay Component, that is the Annual Variable Component (AVC) which is one month or so, and retain only (i) Performance Bonus which relates to the performance of the individual portfolio; and (ii) National Bonus which is linked to how our country performs. And then publicise the Key Performance Indicators (KPIs) for individual portfolios so that Singaporeans have a better understanding of how they are linked to performance bonuses of the office bearers. Developing and publishing KPIs that relate to both the routine operations and new initiatives in the especially essential services such as housing, transport, social services, and education, are important for better understanding of the size of the individual portfolios and promote better quality dialogues. And (iii) expand the National Bonus indicators which are now 100% linked to jobs and incomes. This is to reduce the potential of excessive risk-taking or undesirable tactics to boost the numbers of these composite indicators. For example, starting a third casino to boost the economy may well boost all four components of the National Bonus – the real median income growth rate will increase; the real growth rate of the lowest 20th percentile income will increase; the unemployment rate will be lowered; and real GDP growth rate will be enhanced if we only start a third or fourth casino; but the move may well be an easier path or lazy way to not develop our own tourism products and is detrimental to the long-term competitiveness and social well-being of our people.

Recommendation 3: review the benefits package and let us not over-extend the "clean-wage" principle. Sir, it is a little ludicrous that the dental benefit of our Prime Minister and our Cabinet Ministers is $70 per year and their outpatient subsidy is capped at $350 a year. Consider the provision of common benefits such as car and annual health screening packages that are typically provided to executives in our country. Let us not over-extend this application of the principle of "clean wage" so that it becomes artificial.

Recommendation 4: clarify the job scope and expectations of political appointment holders. Sir, one of the underlying factors leading to the constant unhappy undertone when this subject of political pay is discussed in our country is the lack of awareness of the duties of political appointment holders from Members of Parliament to Ministers and even Speakers.

Members of Parliaments have differing views of their roles. The latest episode during which several Opposition MPs opine that it is the job of Government and not MPs to directly help the poor and needy and therefore referral is the key strategy, caused a debate of its own outside the House. The clarity of duties and goals would be useful even to MPs of the ruling party. The man in the street, for instance, does not understand the role of the Speaker of the House and does not have sufficient information to comprehend how it equates to a Cabinet Minister.

Clarity is also useful in the case of office bearers who hold multiple portfolios, sometimes up to three roles. It takes more than a human being to do three roles effectively and leave little time and space for the incumbent to reflect and reform policies where needed. Sir, instead of sweeping these rumblings under carpet, it is needful to clarify the job scopes and expectations of political appointment holders to our people.

Recommendation 5: conduct a review of the Civil Service leadership pay. One of my deepest concerns is that this Review excluded the some 300 top civil servants in the elite Administrative Service (Admin Service). The title of the Report is entitled "Salaries for a Capable and Committed Government" but the review has deliberately excluded top civil service leaders, specifically the Permanent Secretaries and others in the elite Admin Service; I think 300 of them. This is the group that has often been kept below the radar from public eye although they play a significant role in our country in supporting the Prime Minister and his Cabinet in the development and execution of national policies. Due to their critical role, some of these elite talents are pegged on the same salary band with our Ministers.

Sir, if and when the recommendations of the committee of political pay review are accepted, some civil servants will receive much higher packages than their Ministers. Unlike the political appointment holders, they will also continue to enjoy the retention of benefits such as the pension schemes which will be removed from the Ministers’ packages.

Sir, paying for top talents especially for those who opt for a career in the civil service is not an issue. However, the same principles of rigour in job evaluation, job sizing, accountability for KPIs and disclosure must also be applied. If private firms and charities are expected to disclose the highest paid executives and their salary bands, there is no reason why there should be a cloak of secrecy over the Admin Service incumbents. Sir, I ask the Prime Minister to commission an independent review of top civil service leadership that will go beyond pay to attract, develop and retain talent for a capable and committed government.

In conclusion, Sir, the review of political salaries is a work-in-progress. It needs refinement but it is moving in the right direction. To reject it and to wait for it to be perfect and acceptable to every interested Singaporean, simply means the current system stays. And that to me is not an option.

Like our opinion on this glass, some will continue to insist that it is half-full whilst others will insist that it is half-empty. And then there are those who will provide constructive ideas on how to completely fill this glass and make future reviews even sharper and more acceptable. This is the group who will help in the healing of the differences that have arisen out of the controversial subject of political pay in our country.

On this note, I wish to thank the Prime Minister for beginning to slay one of the sacred cows that has been a source of division and unhappiness amongst Singaporeans. I also want to thank him for graciously donating all of his pay rises in the last five years, in order to defend the policy of attracting and retaining talents to run our country. Finally, I urge all of us, as leaders of this country, to develop a dream for Singaporeans that is so compelling that more leaders with both character and competence will come forward to serve, come what pay.