The Fallacy of Top Dollars = Top Talents

“The question to ask is what lies at the root of the discontent or the disengagement between the G and the people. I am going to stick my neck out and say that it is ministerial salaries. I consider it the root of all evil. Serious. It reduces what should be a social compact into a business contract. We cannot see the family analogy because we are run like a business.” –Bertha Henson

“I liked and respected him (Lim Chin Siang) for his simple lifestyle and his selflessness. He did not seek financial gain or political glory. He was totally committed to the advancement of his cause…Because of the standards of dedication they set, we, the English-educated PAP leaders, had to set high standards of personal integrity and spartan lifestyles to withstand their political attacks.” – Lee Kuan Yew wrote of Lim in his obituary (1996)

“In Singapore you learn to help yourself whenever you can. Our leaders show the way. They helped themselves to millions in ministers’ salary once they were voted into parliament.” -Lucky Tan (source)

 

“They (top civil servants) get paid more, they’re highly educated, and they have bigger egos, bigger than any government employees I’ve met anywhere else in the world. It’s not good or bad, but they consider themselves superior to almost any government employee in the world.” – renowned executive coach Marshall Goldsmith on civil serviants’ ego in Singapore

“I am sure Enron and Worldcom paid more than top dollar for their top executives, and look where their companies are now – six feet under.” – Mohamad Rosle Ahmad

 “A brilliant achiever without the high purpose of service to others would be the worst possible ministerial material.” –  Carolyn Lim

When the then PM Lee Kuan Yew mentioned about the difficulty to attract private sectors’ talents to join and Government and proposed to peg the ministers’ pays to the 2/3 of the top income earners in the country to attract private sectos’ “talents”, little did he realise the backlash that would be coming to haunt the ruling party over the years. After more than 20 years of implementing this policy, the Government failed badly in attracting private sector talents (see article 1 below) and instead alienate their ministers further away from the “voters”. Let me explain.

Every time when something goes wrong in Singapore, many people will chastise the Government for the mistakes. They demand accountability to go with the top dollars. They argue if a CEO in the private sector makes a grave mistake or the company makes a loss, he may be fired. Rightly so, some glaring examples in the last few years when expensive mistakes were made and very little accountability are :

• Mas Selamat escape
• YOG over-budget by 3 times
• Flooding in Orchard Road
• Billion dollars investment losses in Shinawatra and the banking crisis
• Lax immigration policies resulting in escalating housing prices, inflation, crowdedness, job losses

The role of the Government is to set the tone and direction. When the Government can afford to pay themselves so well and spend freely, you start to see the private sectors follow. Land prices, rents, property valuations, salaries also rise in tandem and spill over effects on other necessities such as food prices, transport prices also rises. It is also highly controversial as the Government prefers to keep the world’s highest ministers’ salaries in secrecy knowing that if the figures have leaked, the damage to the Government’s reputation and the high moral to rule will be incalculable.

The often cited argument by the Government is that the high salary is needed to attract talents and prevent corruptions. The politicians often cited the high salaries are small change compared to the overall surpluses and is a small price to pay for good Government. That argument sounds reasonable until you start to add up the cascaded escalating pays of all the high salaries in public services and the cost to govern becomes unattainable. So to make up for the high cost of Government, the Government has to increase the revenue by raising taxes, rents, land prices, transport costs, utility bills and so on.

This same argument is flaw as evident in the 2007 banking crisis in United States where the best paid talents almost brought down the US and the world economy when greed creeps in. How then do you explain the early days PAP Government and the present top leaders in China are drawing symbolic low pays and yet doing a wonderful job? By virtue of their positions and connections, these retired ministers should comfortably land many jobs as Chairman and board of Directors in various stat boards and Government-linked/Private companies. So they do not really need a big pay cheque to begin with and lose the morality to govern.

The other side effect of this unpopular policy is you start to see more and more PAP candidates, in the last two to three elections, see becoming politicians as a golden tickets to their careers after “retirements”. More and more we are seeing more generals, civil servants, CEO/Directors of Government-linked companies to accelerate their career and salary goals. It begs the question: are we attracting the right talents to be politicians?

Also relevant is the question whether such highly paid million dollar ministers can even relate to the plight of the men on the street. The remarks of Mrs Goh Chok Tong, that a SGD600,000 per annum salary (of NKF CEO) is PEANUTS, is a harsh reflection of the real mind-sets, priorities and values of Singapore’s million dollar ministers. And it is these same million dollar elitist bureaucrat who will shape and determine public policies which touch on the daily livelihoods of every Singaporean.

“What I am saying is that in the PAP, when we interview candidates, we always try and probe the candidates’ motivations. It’s very important. What are your motivations? Is it to advance your self-interest? Or are you there to serve the people? Are you prepared to make time and energy, and be available to serve the people?” Goh Chok Tong (2011)

The recent uproar on the vast increase of the President’s pay is another extension of this unfortunate episode. In 1997, Singaporean Prime Minister Lee Hsien Loong recommended an 83% pay increase for all his cabinet ministers, a proposal that would up their current annual pay rate of S$1.2 million (US$784,300) to S$2.2 million. We really don’t know their pays now as the Government do not publish ministers’ pays to prevent a PR nightmare and public backlash. But with the recent high payouts of CEOs’ pays hitting 8-10million dollar mark and the ministers’ pays pegged to 2/3 of the top earners in Singapore, the amount is likely to be double that of S$2.2 million in 1997.

The other unhealthy phenomenon as observed in the 2011 election is the emergence of many young professionals from both the ruling and opposition parties to try their luck in Politics. With many young professionals earning an average of S$5000 to $6000 in Singapore before the age of 35, that is a hefty pay jump of 3 times their current pay (allowance of an MP is $15000 per month) and only need to work on a PART-TIME basis. While some may be genuinely willling to serve and have political blood in them, no one can deny that there may be some candidates that are not. It bags the question: how many of these potential MPs are really keen to serve or just opportunists? Are the high pays the wrong medicine for MPs and office bearers? To be fair, Some opposition candidates tried to distant themselves with this unpopular policy by pledging to donate half or all their MP’s allowance to the party or charitable causes.

As political observer Seah Cheng Nee pointed out in his article ‘High-flyers shy away when the money is good’ : The high Cabinet salaries, which exceed those of even the richest nations in the world, have helped to attract top talent to help build Singapore’s collective wealth. But as the public backlash rises, it may be contributing to dissuading successful high flyers from joining the government for fear of becoming a target of criticism and even insults. In other words, this high pay system may even deter a few potential leaders from joining the political arena.

New model, same price

While the following exchanges happened in USA, the logic still apply here. Remember Lim Swee Say said that “Every month, when I receive my CPF statement, I feel so rich“. High pay sometimes alienate the politicians from the reality of the electorates that they are serving and this example illustrate best:

‘Today, you can buy an iPad 2 that costs the same as an iPad 1, that is twice as powerful. You have to look at the prices of all things.’ said MR WILLIAM DUDLEY, New York Federal Reserve president, to an audience in the working-class neighbourhood of Queens. ‘When was the last time, sir, that you went grocery shopping?’ one audience member asked. Mr Dudley tried to explain how the Fed sees things: Food and energy prices may be rising, but other prices are declining. He tried to reach for a real world example. “So what? I can’t eat an iPad” said an audience member.

Lastly, I urge you to have some patience and listen to the passionate speech by Opposition leader Sylvia Lim on the fallacy of Top Dollars for Top Talents:

Notable Quotes:

“The Government spends tens of millions of dollars on the Formula One race when it will not lift a bit more Public Assistance rate higher…. And yet you are so penny-pinching when it comes to helping the poor with a bit more because you talk very high mindedly about losing the work ethic. It’s all a matter of priorities, let’s have a sense of balance.” – Ex-Head Of Civil Service Ngiam Tong How (2008)

“When Ministers insist on having a ‘MINIMUM WAGE’ that amount to S$3.2 Million to be further increased, and will deny any ‘MINIMUM WAGE’ to be set at a level to cover the Cost of Living that increase continuously with each passing month – it is clear that the self-acclaimed elitist talents in the political leadership – that form the PAP Government – has lost touch with Singaporeans.” A TemasekReview.com reader Atobe

“Obama is grossly underpaid. Our ceremonial president in singapore gets 10 times his pay as the commander-in-chief of the world’s most powerful country….. Seriously, I think the president’s pay rise is the prelude of bigger pay rises for other government jobs. After the election, we will see minister salaries go up in tandem. To finance the increments, GST should go up to 10%.”– A reader of Salary.sg

“Why a President needs $4.3 millions a month (Editior’s note: should be a year) when his country men & women have been organizing all sorts of dangerous charity stunts to ask for donations to help the poor & disabled?”– A reader of Salary.sg

“Singapore is not a normal country operating on outdated principles like a “Western Style Democracy” where leaders are put through rigorous elections, we are Singapore Inc …a place where leaders are hired and selected the same way accountants, lawyers and engineers are SELECTED. Our election is conducted to show support for estate upgrading. Hence, it is only logical for our ministers pay NOT to be peg to other countries’ minister pay but to top professionals.” – Lucky Tan

Read more:

• Ministerial Pay Review-The Reactions
• Singapore Ministers Pay, Legitimised Corruption

• Singapore’s ‘fat cat’ ministers to get fatter
• Singapore Ministers’ PAINFUL Sacrifice : Unfair and Unjust System Part 2
• Ministers’ salaries set to be raised with Singapore’s economy expected to grow next year
• The 10 Highest-Paid Government Jobs
• An End To A Major Source of Moral Corruption
• 一个低薪工友打败一个世界最高薪的总理
• 5 reasons Josephine Teo’s service to S’pore must be measured in dollars and cents – what an irony! The poor soldiers’ contributions can not be measured by dollars and cents so should not reward accordingly but ministerial’s sacrifices can!!!
• The convenience of outsourcing the blame –  as blogger Bertha Henson wrote, the root cause of all the systematic breaking down and unhappiness of public is the high ministerial salaries. Askmelah will like to add that the Scholarship system original intention was well and good but has been twisted and turned to become a perturbed system that has become a liability rather than asset for Singapore. Read more.

Updated 5 Jan 2011: Deep cuts proposed to pay of political leaders !!!

Article 1: High salaries have not attracted candidates: WP

Source: The Straits Times 02 May 2011

(WP) chief Low Thia Khiang attacked Singapore’s high ministerial pay, which is intended to ensure that quality candidates from the private sector step forward. — ST PHOTO: DESMOND FOO

WORKERS’ Party (WP) chief Low Thia Khiang attacked Singapore’s high ministerial pay, which is intended to ensure that quality candidates from the private sector step forward.

He said at the opposition party’s rally on Sunday night that the People’s Action Party (PAP) has had slim pickings from the private sector, with two-thirds of its crop of 24 new candidates coming from the public sector.

By contrast, private sector talent have joined the WP and other opposition parties, he said, in an obvious reference to his party’s star catch, high-flying corporate lawyer Chen Show Mao.

‘So what happened to the high-quality people from the private sector that the high salaries are supposed to attract?‘ he asked, at the rally at Yishun Stadium.

‘It’s a sign that good governance doesn’t necessarily require high salaries. So it’s time for you to decide – if you want good governance, you must vote WP and move towards a First World Parliament.’

Article 2: CapitaLand chief exec’s total compensation package rises to S$6.7 million last year

Every time you read a headline like this in which government-link companies’ CEOs are getting this kind of salaries, it begs the questions

1) are they learning from the Government who overpays themselves;

2) the higher more such people earn this kind of salary, it means that the average minister’s pay is going to increase since their pays are pegged to these high income earners and

3) how can some of these Government-linked companies get paid so well since many such organisations are spun off from the Government owned assets which by virtues of their size are large, which means higher chance of revenue and profits.

The ability of individuals do play a part but not to such inappropriate proportions to their rewards. It all boils down to the original argument “should the Government and Ministers’ pays peg to the top income earners”, is it desirable for the nation and is it morally right?

• DBS pays CEO Piyush Gupta S$8m for 2010 –  Another GLC (Government-Linked Company)
• Singapore bank chiefs among Asia’s better-paid (The Straits Times, Apr 18,2011)
• CEOs of local Industrial and transport firms get good pay deal (The Straits Times, Apr 18,2011)

Article 3: Majority not concerned about ministerial pay: SM

Source: TodayOnline.com 3 May 2011

Describing the issue of ministerial salaries as the Opposition’s “favourite flogging horse”, Senior Minister Goh Chok Tong said yesterday that the “majority” of the population were not concerned about it.