Speech in Parliament on Ministerial salaries debate

Mr Speaker, I support some of the proposals in the White Paper, including the removal of pensions and the introduction of the National Bonus. However, I fundamentally disagree with the top-down approach of benchmarking Ministerial salaries to top income earners, as well as the principle of paying out huge bonuses to political leaders.

This is the speech I delivered in Parliament today during the debate on Ministerial salaries. Click here to watch the video.

Parliament

Mr Speaker,

Thank you for giving me the opportunity to take part in this debate.

Like my honourable colleague, Mr Chen Show Mao, I believe that the White Paper’s approach of benchmarking Ministerial salaries to the top income earners is fundamentally flawed.

The proposed benchmark pegs entry-level Ministers’ salary to three-fifths of the median income of the 1,000 highest earning Singaporeans. This group represents the top 0.06% of Singaporean income earners. It presents no significant shift from the previous 2/3 M48 formula, which pegged Ministers’ salary to two-thirds of the median among a small group of 48 professionals, comprising top bankers, lawyers, MNC chiefs and others.

This new formula still benchmarks Ministers’ salary against the richest of the rich, reflecting an approach that appears to be based on a number of questionable assumptions:

Firstly, it assumes that Ministerial talents should be first looked for among the highest income earners. The Paper states that the benchmark “reflect(s) the calibre of the people which Singapore needs for good government”.

Secondly, it expects most Ministers will be parachuted in from the top echelons of the private sector, rather than going through the paces of first being elected as MPs, gaining experience on the ground, before being promoted to junior ministers and finally full Ministers.

Thirdly, it assumes that potential Ministers are often reluctant politicians, who consider entering politics to be a sacrifice and a burden, rather than a privilege to serve the nation, and they therefore need to be coaxed with monetary incentives before stepping forward.

I would like to thank the Deputy Prime Minister for his explanation during his speech earlier. He was concerned that if we drastically reduce Ministerial salaries, it might shrink the potential pool of talents to draw from.

Mr Speaker, selecting political leaders is not a game of chance. It is most important that we are able to identify and recruit good leaders. The goal should not be to enlarge the pool of people to draw from.

In fact, by filtering out individuals who are—to put it bluntly—in it for the money, we could actually streamline the process of identifying capable and passionate political leaders who can take our nation forward.

The DPM also expressed concern that if potential Ministers waited 10 to 15 years before entering politics, we might miss them in their prime years.

I would like to suggest that people who are truly passionate about serving Singapore in the political arena will make the necessary financial plans and adjust their future financial commitments to fit the salary they will be receiving.

Mr Speaker, Mr Chen Show Mao has already articulated the Workers’ Party’s proposed salary benchmark. I would now like to focus in more detail on the bonuses proposed in the Paper and what the Workers’ Party views as a more appropriate way of structuring the variable pay of political appointment holders.

There are several components of the variable pay of Ministers in the proposed framework: A new National Bonus, an individual Performance Bonus, an Annual Variable Component (AVC) and a Special Variable Payment.

Purpose of bonuses

With the new bonus framework, Ministers can expect to get 7 months’ bonus as part of their “normal” compensation package, and 13.5 months or more in an exceptional year. The latter will more than double their already high base salary.

Sir, the purpose of a bonus is to provide an extrinsic motivation for a worker to perform well on the job, especially when his or her base salary is not high.

However, entry-level Ministers’ base salary of $55,000 a month already puts them among the highest wage earners in Singapore, so there is little reason why it needs to be supplemented by such a large bonus.

More importantly, we need to ask whether our Ministers are the type of people who need such huge bonuses to motivate them to perform well. Did they not all claim to have entered politics to serve the people?

I am hopeful that the honourable Members who hold political office will still be motivated to serve the people of Singapore even without such large bonuses.

Even if our Ministers need more than just intrinsic motivators to perform well, in a properly functioning democracy with a First World Parliament, there should be sufficient extrinsic motivators to spur their performance. These include scrutiny by Members of Parliament, the media, civil society and the public at large.

Of course, the most important motivator for the Ministers is the need to convince voters to re-elect them during the General Elections.

Bonus quantum

I recognise that the bonuses and allowances have been reduced from as high as 26.5 months under the previous framework.

However, the proposed bonuses are still excessive. Such large bonuses are usually seen only among senior executives of large corporations, which of course are the very people the Paper proposes to benchmark Ministers’ salaries against.

In fact, bonuses for political leaders are still largely unheard of in the rest of the developed world. Among the 12 well-governed countries and territories that the Workers’ Party studied, we have found so far that only one country—Japan—makes annual bonus payments to its Ministers.

Japan’s prime minister received a bonus of just 2.6 months in 2011 .

I also disagree with the approach of paying out bonuses of as high as 7 months for simply meeting targets.

Even in the private sector, 7-month bonuses are generally only paid when both the employee and the company far exceed their targets.

In other words, it is an additional payment for doing much better than expected. It is not a payment for just meeting the expectations of their job—that is what their basic wage is for.

Last year, workers in Singapore got an average of just over 2 months of variable bonus , while our political leaders are set to receive 7 to 13 months of bonus, on top of their already high base salary.

This can only serve to accentuate the empathy gap between the Government and the people.

To bring bonuses down to a more acceptable level, I propose that the total variable component should not exceed 5 months, even in a very good year. If all targets are just met, the payment should be about 3 months. This is in addition to their 13th month Annual Wage Supplement.

To encourage a Whole-of-Government approach to policymaking, the National Bonus should form at least two-thirds of the variable component, with the individual Performance Bonus making up the remaining third.

National Bonus, Performance Bonus and AVC

Mr Speaker, I am glad to see the introduction of a National Bonus. The focus on the income growth of ordinary workers is a welcome departure from the disproportionate focus on GDP growth rate alone, which was the basis for the GDP Bonus in the past.

The previous GDP Bonus could pay out as much as 8 months’ salary in a high-growth year like we saw in 2010.

With regard to the Performance Bonus, the Paper states that it allows the Prime Minister “the discretion to reward a political appointment holder based on performance in his immediate portfolio, as well as wider contributions at a Whole-of-Government level”.

I would like to see greater transparency on the Performance Bonus component, as well as a lowering of its discretionary element.

Sir, I propose that key performance indicators (KPIs) and KPI targets for each ministry be defined at the start of the term of Government.

These KPIs and their targets should be made public, and they should be aligned to the goals that the Government sets out at the opening of Parliament.

Each year, the individual performance bonus of the Minister helming that ministry should be computed based on the achievement of those KPI targets.

Since it would be impractical to tie each and every ministry performance indicator to the Minister, we could select just the most relevant KPIs affecting the majority of Singaporeans.

For example, the Transport Ministry could set KPIs like the frequency of MRT disruptions and commuter satisfaction survey results.

The KPIs could also provide more transparency to the public on a Minister’s performance. Voters may find the information useful for making their decisions at the ballot box.

With the introduction of the National Bonus, I see no need to retain the Annual Variable Component and Special Variable Payment, which are both also based on Singapore’s economic performance. I propose that we do away with them.

Deferred bonuses

Sir, if we are going to have such large bonuses, then a portion of the bonuses should be deferred, rather than having the whole bonus paid out at the end of each year.

A deferred bonus could be structured in the form of a “bonus bank”. This is a concept that some financial institutions introduced in the wake of the last financial crisis to discourage their senior executives from pursuing short-term results at the expense of consistent performance over the longer-term.

Only a portion—perhaps one-third—of the Minister’s National Bonus and Performance Bonus should be paid out at the end of each year, with the rest deposited into a separate account.

If in subsequent years, performance is good, their bonus bank balance will grow. However, if performance fails to meet targets in any one year, there should be a “claw back” which deducts from their bonus bank balance.

At the end of the term of Government, when Parliament is dissolved, the Ministers will get paid what remains in their bonus bank account.

If, say, performance had been good in the first year of Government but poor in subsequent years, the Minister could potentially lose all that is in his or her bonus bank account.

This would help ensure that Ministers always carefully consider the longer term consequences of their policy decisions.

Summary

In summary, Mr Speaker, I support some of the proposals in the White Paper, including the removal of pensions and the introduction of the National Bonus.

However, I fundamentally disagree with the top-down approach of benchmarking Ministerial salaries to top income earners, as well as the principle of paying out huge bonuses to political leaders.

Mr Speaker, for these reasons, I oppose Motion.

5 thoughts on “Speech in Parliament on Ministerial salaries debate”

  1. I really get a sense that the parliamentary debate over the ministerial salaries is just ‘going through the motion’. The PM has already said all recommendations will be accepted, and the PAP has the numbers to begin with.

    It almost feels like the debate is just to show that the system goes through a process, even if everyone knows what the end result is.

  2. Excellent speech Excesses by PAP to enrich themselves from public revenue should be curtailed

  3. excellent stuff gerald.

    you are 100X better value for tax-payers-money than 95% of the PAP MPs out there. If WP can consistently recruit candidates like you, then surely its a matter of time before the public sees the PAP for what it is – overrated, overpaid and overdue for a electoral boot in the ass

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