10 ideas for ministerial salary reform

Leong Sze Hian, Alex Lew

1. Remuneration should have a reasonable basis and be internationally benchmarked across comparable nations. What constitutes a reasonable basis? A benchmark that would command an above average pay and to reflect the risks of the job scope would be considered fair.

2. The structure of remuneration should include a larger variable portion. The variable payment should be dependent on key value drivers for different ministries. For each ministry, the minister should lead a team in a discussion to find out what drivers best describe the mission of the ministry.

3. Pension for ministers, if given, should be based on a floating equation corresponding to longer term GDP and social measures. For example, a minister who does exceptionally well short term, but in the long term, if growth becomes unsustainable, causing stagnation of job growth – should have his pension adjusted downwards.

4. Salary review should take into consideration learning points from the 2008 financial crisis. It was precisely huge CEO salaries and short term performance focus that instigated the growth of the credit bubble. Are we creating incentives for speedy and unsustainable growth rates?

5. The review should consider Maslow’s hierarchy of needs. Monetary benefits is only one of many psychological needs. Ministers being human have self actualization needs which may already be fulfilled by their appointments.

6. Just like the corporate world, a leader who does not perform should be promptly removed and his pay docked. If a minister clearly cannot perform his task within reasonable expectations, provision should be made to remove the office holder.

7. Stronger corporate governance can be installed through consistent review schedules. We suggest that the relevant ministries assess their ministers through a structured assessment process. Within the cabinet, the Prime Minister could issue a bi-yearly assessment of his ministers on behalf of the people.

8. Shadow ministries among alternative parties could be encouraged to track the performance of the ministries. This is akin to an objective audit review. Shadow ministries’ reports may be presented to the people through the media.

9. The salary review should also consider making pensions a selective incentive. Only above average ministers should be offered the scheme.

10. The review should take into account any unique circumstances. For example, a surgeon’s working life may be shorter than that of a minister. Therefore we may not be comparing apples to apples when we try to match a minister’s previous pay. A high paying corporate executive could be sidelined anytime should a younger and better performing one be found. This explains why corporations often lay off senior executives. In the same light, we should not be taking in such highly paid employees and immediately create sovereign liabilities which will be paid by taxpayers, through high pay and life long pensions.

 

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