Compensation structure: Genco board members refuse to give up perks

Private sector experts resist government austerity drive

ISLAMABAD:

Even as state-owned power generation companies struggle to pay their bills to literally keep the lights on, the private sector board members brought on to help revive these companies have refused to accept the government’s austerity measures that would cut back on their perks.

The government currently owns five thermal power generation companies (Gencos), each of which is in dire financial straits and has hired experts from the private sector – accustomed to higher compensation than is normal in the public sector – as board members to help revive their financial health. The power plants that have private sector experts include the 650 megawatt (MW) plant at Jamshoro, the 800 MW Guddu plant, the 1,000 MW Muzaffargarh plant, the 30 MW Lakhra plant and a power plant currently under construction at Nandipur.

Water and power ministry officials say that these experts are housed in luxury hotels when they travel, in addition to be granted special allowances above their salaries to compensate for the losses of their private sector incomes. Ministry officials say that these companies cannot afford these benefits at a time when they face heavy losses. They accuse the private sector members of the boards of these companies of taking advantage of the government’s need for their expertise.

The water and power secretary confirmed that the details of the compensation structure for the private sector board members of the state-owned Gencos. He added that the government had recently approved a standardised compensation package for all Genco board members which they were required to adopt by January 31. However, this move had been resisted by the private sector members of those boards, on grounds that it constituted interference in the affairs of company boards that are ostensibly independent.

Yet one government official at the petroleum ministry pointed out that the argument against the standardised compensation package was invalid on two counts. Firstly, the government has the right to set the financial direction for all companies established with public funds. And secondly, under the 1984 Companies Ordinance, remuneration for directors are supposed to be set by shareholders, which in this case is the government.

Government officials are of the view that membership of the board of directors at a state-owned power company is meant to be a position of honour, rather than a source of income for those appointed to the boards. “This resistance in adopting policy directives to reduce perks is an indication of deep-rooted interests of the private sector members,” said one government official.

Yet others argue that the government officials always complain about the higher compensation packages offered to lure private sector experts to work for the government sector. Most governments around the world tend to try to compensate private sector experts with higher pay than is common within the public sector.

And given the fact that the boards of these companies would otherwise be filled up with officials from the water and power ministry and the petroleum ministry, civil servants from these ministries have a direct financial incentive in seeking the removal of the private sector experts hired onto the boards.

Published in The Express Tribune, February 3^rd, 2015.