EO standardizes pay and perks of GOCC, GFI executives

Press Release
February 11, 2011

MALACAÑANG, Philippines  –  Malacañang has issued an executive order standardizing the salaries and bonuses of executives in government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs) to strengthen control over compensation levels.

President Benigno Aquino III signed Executive Order No. 24 on Thursday to address deep concerns on the excessive and unreasonable pay and perks received by board members and trustees of GOCCs and GFIs that had unnecessarily depleted government funds and caused demoralization within the bureaucracy.

“This EO will serve as a stop-gap measure to rein in excessive pay for GOCC board of directors and trustees until a law is passed mandating such,” Executive Secretary Paquito N. Ochoa Jr. said on Friday.

According to Ochoa, one such measure is Senate Bill No. 2640 or the proposed GOCC Governance Act of 2011 put forward by Senator Franklin Drilon, which is now pending in Congress.

The Executive Secretary said the EO set out the policies on salaries, per diems, allowances, bonuses, incentives and other benefits of the GOCC and GFI board of directors and trustees “to a level that is reasonable, justifiable and appropriate.”

“While we do not begrudge GOCC execs for rewarding themselves for exemplary performance, these financial rewards should be within reason. This EO seeks to set the guidelines that will standardize pay rates to prevent abuse,” Ochoa said.

He thanked the Departments of Finance and Budget and Management for “working with us to exhaustively study and review existing compensation policies. Their input was invaluable in the drafting of these policy guidelines.”

The EO covers board members and directors of GOCCs and GFIs regardless of classification and whose compensation shall be subject to the approval of the President.

It also includes representatives of GOCCs in the boards or private corporations wherein the government or GOCCs have investments.

This means that all chartered and non-chartered GOCCs – whether covered or exempted by the Salary Standardization Law – and their subsidiaries are directed to comply with the policies and guidelines on compensation and reimbursable expenses set by the EO.

Under the new guidelines, the peculiar nature of corporations in terms of size, strategic positioning, nature of operations and financial capability should be taken into consideration in determining a compensation system that is consistent with the pay practices in public and private corporations, as well as the principle of equal pay for work of equal value.

The maximum amount of performance-based incentives to be granted to board members or trustees should depend on the size of the GOCC and GFI, and should not exceed 50 percent of the board member’s annual compensation received for outstanding performance.

The EO says reimbursable expenses cover performance of official functions such as transportation going to and from the place of meetings, travel during official trip, communication and meals during business meetings. These, however, are subject to budgeting, accounting and auditing rules and regulations.