I was prompted to write this article because of my dismay at news reports about the salaries/fees payable to the Chief Executive Officers (CEOs) and the Chairmen of the Guyana Power and Light (GPL) and the Guyana Sugar Corporation (GUYSUCO), in the light of the disastrous performance of these state-owned entities over the years. I am even more dismayed at the feeble attempts by those in authority to justify such payments.
I do not know whether this state of affairs also prevails in other state-owned entities. What I do know, however, is that many officials holding senior positions in the Public Service, especially contracted employees and officials attached to special projects, are also enjoying very high levels of emoluments vis-ẚ-vis those in comparable positions in the traditional Public Service and the Private Sector. Some of them are paid in United States dollars from loan or grant resources, or in Guyana dollars, both free of income tax. When one compares the training and experience of many of these officials with the salaries they are paid, one cannot help but to feel outraged at the level of mismatch involved.
Today, we take a closer look at the operations and financial performance of GPL. Enough has already been said by other observers and commentators about GUYSUCO, especially the compensation packages of the Chairman and the CEO.
The salary of CEO of GPL
The CEO’s monthly salary is reportedly $5 million, equivalent to 142 times the national minimum wage. Even if it is $4 million, as one commentator suggested, the multiple will be 114. One assumes that he is qualified engineer with a Master’s degree with specialty in power generation and distribution. However, how does one justify a salary of US$20,000 or US$25,000 payable him, not to mention all the other benefits that comprise his total compensation package. By way of comparison, the UN Secretary-General, the highest ranking official in the UN, gets a monthly salary of US$18,938, while surveys carried out indicate that federal employees in the United States earn at least 25 per cent less than their counterparts in the UN.
Reacting to media reports on the matter, the CEO commented that ‘if you want people who are delivering goods, then you have to pay them. You can’t say we are poor so you pay Guyanese rates…if not, forget about performance and employ someone who you think you can pay”. He further stated that to get desired results, market rates have to be paid, and that outages are necessary for better service. These are extraordinary statements, considering that GPL has for several years now been in serious financial difficulties that require massive injections of financial resources from the Treasury. This is in addition to continued financing from the Inter-American Development Bank by way of loans since the early 1990s to upgrade the utility company’s operations.
If one were to take the CEO’s statements seriously, then Guyana will probably rank as perhaps the only country where compensation packages are not linked to the size and performance of the economy and where fair and equitable wage rates are not uniformly applied to all sectors. It is also unclear what frame of reference the CEO used when he spoke of market rates and of the “goods” being delivered, when in reality power outages, massive theft of electricity and significant seepages of electricity generated, are the order of the day.
Directorship and remuneration
The position of chairman of GPL is a non-executive one, i.e. it is not a full-time position. The Chairman’s main responsibilities are to: (a) schedule 12 regular meetings of the Board annually and any special meetings as are deemed necessary; (b) set meeting agendas; and (c) work closely with the CEO and the Company Secretary. For this, he is reportedly paid $4 million per annum. The Government has since denied that the directors, including the Chairman, are being paid for their services while the CEO subsequently claimed that his statement was in relation to divisional directors and not board members.
According to Note 28 to the 2012 audited accounts of GPL, the remuneration paid to 29 key management personnel during the year was $331.075 million, which works out to an average of $951,362 per month. In addition, Section 163 of the Companies Act 1991 provides for a company to disclose directors’ remuneration as part of the accounts or in an annex thereto. However, no such disclosures were made in the audited accounts for 2012. Even if no remuneration was paid, that fact should have been stated.
That apart, the Chairman holds a full-time position as the Executive Director of NICIL (whose operations include those of the Privatisation Unit of which he was also the Head) as well as the Head of the Atlantic Hotel Inc. that is overseeing the construction of the Marriott Hotel, not to mention directorships in other state entities that he may have held. In my article on the Marriott Hotel Project, I had referred to the heavy workload of NICIL and that in holding these two positions, the Executive Director may very well be over-extending himself. At that time, I was not aware that he is also the Chairman of GPL, which further compounds the issue.
The various positions held by the Chairman of GPL raise the question of whether or not we should place a restriction on the number of non-executive directorships a person can hold while in full-time employment in another institution. After all, there is a limit to what one can conceivably do after attending to his/her full-time duties. In addition, these directorships should as far as possible be held by persons who are trained and experienced in the relevant fields for which they are required to serve so as to make a meaningful contribution to the strategic direction and policies of the organization, having regard to its nature, size and complexity. I am heartened that Cabinet is examining the issue of remuneration of directors of state agencies and it is my hope that it will also consider these two issues as well when selecting board members.
Another member of GPL’s Board is also a member of both the Public Service Commission and the Ethnic Relations Commission (ERC), both of which are constitutional bodies. He is also the General Secretary of a trade union and the President of an umbrella body of trade unions. While it is good practice to have trade union representation on state boards, the fact that he is a Commissioner of two important constitutional bodies does pose a problem. It is a fundamental principle in public management that holders of constitutional offices ought not to occupy positions in the Executive branch of Government, as this can impinge on their independence in the constitutional positions they hold.
In 1992, I was approached to take up directorships on state boards. I declined on the grounds that as Auditor General and the holder of a constitutional position, it is improper to do so since this would compromise my official position and could result in a conflict of interest. I hope the current Auditor General is not sitting on any state board or committee that is seen as part of the Executive. Some time ago, he had chaired the Special Task Force involving officials from the Ministry of Finance, Guyana Revenue Authority and the Police Force, to investigate the Polar Beer Scam, and I had expressed my disappointment in my previous writings. Needless to mention, the investigation fizzled out into nothing.
GPL’s financial performance
The results of operations of GPL paint an extremely troubling picture for the company, as shown below:
2006 2007 2008 2009 2010 2011 2012
$M $M $M $M $M $M $M
Turnover 17,742 19,861 22,978 23,973 26,568 27,533 29,028
Generation costs 14,401 16,925 20,978 15,971 19,899 25,873 27,078
Profit/(Loss) from operations (1,581) (2,362) (2,898) 2,919 948 (4,435) (4,873)
before taxation
During the period 2006-2008, the company recorded three consecutive years of losses totaling $6.841 billion. It then recovered in 2009 and 2010 due mainly to lower generation costs. However, the losses in the years 2011 and 2012 amounted to $9.308 billion, giving a total net loss before taxation of $12.282 billion for the last seven years. If GPL was a privately owned company, it would have been obliged to file for bankruptcy a long time ago.
The Treasury provided GPL with $1.5 billion and $6 billion in fuel subsidy for 2011 and 2012 respectively. The company was obliged to treat the subsidy as a source of revenue. However, according to Note 13 to the audited accounts for 2012, GPL applied these two amounts to increase its share capital. Had these two amounts been reflected as revenue, the results of operations would have instead reflected a reduced loss of $2.935 billion for 2011 and a surplus of $1.127 billion for 2012. These figures must be viewed against the proposed increase in electricity tariffs of 26.7 per cent.
Section 24(2) of the Audit Act requires the Auditor General to ascertain whether all moneys expended and charged to an appropriation account have been applied to the purpose or purposes for which they were intended. However, a review of his 2011report (under Office of the Prime Minister through which the subsidies to GPL were granted) did not reflect any comments in relation to GPL’s conversion of the $1.5 billion in fuel subsidy to share capital. There was also no evidence that Parliament sanctioned any change of arrangement regarding the release of the funds by the Treasury for 2011 and 2012. GPL therefore appeared not only to be in violation of the law but also guilty of manipulation of its accounts.
To be continued
