Corruption of the bonus system

The first thing that Obama did right was to curb the abuses of the compensation and bonus payout system in corporate America. No longer will the corporate big wigs be allowed to pay themselves crazy by abusing the trust of the minority shareholders and corruptly paying themselves with their so called bonus schemes. They design and decide how much to pay themselves, with approval of course. Actually I can't use the term corrupt as the bonus schemes were all approved by the board of directors. The payout is thus legitimate and above board, objective and according to an approved formula. The top management could even claimed that every cent they got from the bonus system is deserving. And some companies were paying their CEOs tens of millions even when the companies were bleeding, losing hundreds of millions. Superficially the bonus system appears sound. But as they said, the devil is in the details. Were the formula transparent and made known to the shareholders, and accepted by the shareholders? What were the factors in the formula and how relevant were they to the health of the companies? Could the formula pay out exorbitant amounts, unlimited amounts at the expense of the shareholder's interest? Could the factors be juggled and doctored by the accountants to reflect whatever they want to and to maximise the payout? The other problem with the bonus system is that it can be used to pull wool over the eyes of the shareholders. The top management can, for cosmetic reasons, adopt a pay freeze, smaller increases, or even a pay cut to appease the shareholders. But on the contrary they could boost up their bonus payouts from 3 mths to 6 mths, or 6 mths to 12 mths or 24 mths. No one is wiser except the people designing the scheme and managing the scheme. Transparency is important but not often practised. Obama did the right thing to freeze or cap the bonus payout. And now the American corporate wants to side step this by paying themselves upfront. The top management will scheme and scheme to pay themselves as much as they could as they don't own the companies. They were just employees. Grab as much as they can when in office.

They trusted him

In the Shi Ming Yi case in court yesterday it was reported that they trusted him and let him determine his own salary. And they have good reasons to do so. Ren Ci is so successful today because of one man, I mean monk. Shi Ming Yi is so talented and has a lot of followers and is able to raise the profile of Ren Ci and the multi million dollar donations that it received over the years. So, shouldn't people be grateful to his great contribution and talent and let him continue to run the organisation the way he knows best?

How we pay multi million dollar politicians

Now that the world is standing up to take notice of this extraordinary feat maybe we should enlighten them on the hows and whys. The rest of the world, especially politicians, must be wondering how we could pay politicians this kind of salary and the people are happy and supportive of it. They may think that if they were to propose it in their own countries there will be immediate mass demonstrations and riotings in the streets. But we did it, and for so many years, it has become part of our system of good governance. For the likes of Obama, Brown or Sarkozy, who may want to think about how to go about convincing their electorates to pay them a few million dollars in salary, the following could be a useful guide. In the first place the country must be rich enough to be able to afford the million dollar salaries. And for America and the rich European countries, this is a given and not an issue. If the people were to quibble about it, just tell them that it would cost them each a hot dog a year. Very reasonable and affordable. The next point or the most important point is to convince the electorate that they must have the best talents to lead the country. And the only way is to pay them well. Otherwise they will want to become bankers and lawyers or be in Wall Street making hundreds of millions. Our slogan is pay peanuts and you get monkeys. Surely they would not want their parliaments and congresses to be filled with monkeys. This is a very powerful argument. The other important argument is human nature. People in position of power will by nature become corrupt. To stop them from becoming corrupt, pay them up front, and pay them well so that there will be no incentive to become corrupt. This is understanding nature and human weaknesses. Once these arguments are out of the way, work out a formula to make it objective. Peg the salary of the politicians to the 100 highest paid employee's salary in the private sector. But don't peg it to the top dog. That would be too excessive. Say pick the 49th person or 50th person's salary as the bench mark. That will look very reasonable. Now debate the formula in parliament and passed it into law. Then the salary package will become legal and legitimate. See, QED. Oh, there are some other conditions to make this formula successful. The ruling party must have an absolute majority to ensure its safe passage in parliament. As for street protest in case the ignorant electorate could not understand the brilliance of such a formula, ban them. Actually, the successful implementation of this million dollar salary package for politicians requires supertalents. Only supertalents have the ability to pull this through and be able to convince the people that it is good for them and the country. Actually no, you need exceptional supertalents. Better still if they are demigods and immortals.

Highest paid politicians - the numbers are wrong!

Yes, the numbers quoted for the world's highest top 30 politicians are wrong, way off the mark. Too conservative. What were quoted in the article were only the basic 12 months' salary of the politicians. There is another element that forms part of the package. Oh actually there were two elements, another bonus payment that can go as high as 12 months of the monthly salary. Some have quoted a figure of 16 months. And there is also pension. To quote Hsien Loong during his answer to Steve Chia, a NCMP, this was what he said. 'Mr Speaker, Sir, it is an entire package. When we calculate the salary, we look into how much a person receives now, how much he receives in the CPF, and how much he can expect to save in pensions. And when a person retires, he has a choice of having a pension stream for the rest of his life or taking a commuted lump sum at the point of retirement. In fact, as a matter of fact, nearly everybody who retires prefers the commuted lump sum. Because you take a lump sum, you invest it, you do what you want. If it runs out, it runs out. There is no free lunch. If you do not have your CPF, you have the pension. If you have the pension, you have less CPF. So it all adds up to a finite amount. The Member's implicit question is: are the Ministers enriching themselves again? And the answer is, we are going on market terms and, if anything, we are paying below what the market is.' It is an entire package, ....it all adds up to a finite amount. So, when we said that a minister or Prime Minister is getting say $3m, he could possibly get $6m, plus or minus a little depending on his bonuses. Then on top of that, if he has reached 55 years of age and has served 8 years as a minister, he is entitled to another 2/3 of his basic salary. There is a formula and definition of the basic salary in the Parliamentary Pensions Act. So if a Prime Minister is getting $3.9m, he could be getting another $3.9m in bonuses and another 2/3 of an X salary. This could easily be another $2m. That will come to around $9.8m. This $9.8m is the entire package, excluding other perks. Thus, all the figures quoted are way off their marks. They should be multiplied by 2 or 2.67 times. Would these numbers drive the political leaders of the world, especially the rich western nations, insane? They must be kicking themselves for being so underpaid.

This blog is quoted in the London Times!

Thank you Green Peas. Your article is not only quoted in the London Times online and in many other blogs and forums around the world, it also enlightens the world on how well we are governed as a country. http://www.mysingaporenews.blogspot.com/ is now famous man! I have noticed that the readership these few days have shot up furiously. Here is the link: http://timesbusiness.typepad.com/money_weblog/2009/04/the-10-highest-paid-politicians-in-the-world.html#more