Link pay of leaders to happiness index
Wednesday, 21 May 2008, 7:00 am |
Out Of The Box is TOC’s new column by Kin Lian.
Tan Kin Lian
A few days ago, someone asked me this question, “Do you think our leaders’ performance is commensurate with their pay?” I suspect that he wanted me to comment if our leaders are over-paid for their current level of performance.
It is my policy to avoid commenting on any specific person’s performance and pay.
I wish to share my personal views on how corporate and government leaders around the world should be rewarded.
The prevailing thinking is that corporate leaders should be rewarded based on the shareholder value that they have created. This approach appears to be wonderful in theory – but is difficult to apply in practice.
The current method of measuring shareholder value based on the share price is flawed. The share price can fluctuate wildly based on many factors, some of which are not related to performance of the corporate leaders.
Corporate leaders like this method because they can get fat bonuses in good years, and are not required to pay back these bonuses during the bad years.
But this method creates a great moral temptation for corporate leaders. Some corporate leaders manipulate the accounts to show big profits in the early years. Remember Enron and Worldcom? Some others take big risks to boost short term profits. Remember subprime mortgages, hedge funds and special investment vehicles?
These corporate leaders earn unimaginable amounts during the good years. When their companies have to write off billions of dollars of shareholder money in the subsequent years, these leaders depart with golden parachutes.
How should government leaders be paid?
It is important that the rewards should attract the right type of people – those willing and able to take the risks and nature of political life.
Monetary reward is an important factor. However, it should not be the sole or dominant factor. A passion for this type of work and life is equally important.
We should attract leaders who have the passion to help improve the living standards of the ordinary people. These leaders are willing to put the public’s interests above their personal interests, and give up the bigger rewards of corporate life.
They need to receive an adequate remuneration, so that they do not need to supplement their incomes through corrupt means. A remuneration of 10 to 20 times the average national wage, accompanied by a good pension, should be adequate to give a comfortable life. But it will not put them anywhere near the earnings of top corporate leaders and professionals.
I believe that there are many capable people who are willing to come forward for the satisfaction of serving the people and an adequate remuneration. This will be the best type of people to be in government.
If a country cannot find this type of people, then there must be something seriously wrong with the values of that country!
How to assess the performance of a government
In a democratic society, the government is elected by the people for a term. Ultimately, it is the people that judge the performance of the government.
There are flaws in this system of evaluation by the ordinary people. In some countries, the votes can be bought through “money politics”. People may be swayed by immediate and temporary factors, and may overlook the long-term interests.
Someone said that democracy is a bad system, except that nobody can find a better system!
A good government can improve the standard of life and happiness of the people. Economic prosperity is an important factor, but it should not be the only factor. Quality of life – a slower-paced life with less stress, more leisure time and security – is also important.
There should be greater equality, fairness and opportunity for all. The weaker and poorer people should not be exploited. People should not have to continue working until they die, unless they really enjoy the work.
The key performance indicator of a government should go beyond economic growth. Some people argue that it should be “gross national happiness”. Three international conferences have been organised to promote this concept, the latest being the November 2007 one held in Thailand.
The promoters of this concept argue that quality-of-life indicators should be included together with economic indicators in happiness indexes when using them to assess the performance of governments.
The performance of a government is best measured by the happiness index. If the majority of the people are happy, they are more likely to re-elect the existing government.
Editor’s Note: Ministers are scheduled to have their 3rd salary increase some time later in 2008.
Read also:
Paying more for good people - what if it backfires? by Andrew Loh.
Ministers’ salaries - 2nd upward revision soon by Andrew Loh and Andrew Ong.
Ministerial pay: Uniquely Singapore, F1 or F9? by Leong Sze Hian.
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Dear Mr Tan,
Your comments carry the insight of someone who spent time working through the ranks. Well, we all know what you used to do for a living. Singaporeans needs policy makers who are selfless and in touch with reality. You had the passion and personal touch in your previous position. Is there any chance that you will extend that for the benefit of Singapore
Hi Kin Lian,
You’ve raised an interesting proposal, but I think it can still become a victim of the “money politics” problem you raised. There are always short-term ways to raise happiness, such as establishing lavish welfare schemes or drastically lowering taxes, but the drawback may come only decades later.
Hi Mr Tan,
I hope you would reconsider your point about not mentioning names/personalities. Let’s call a spade a spade. Otherwise, general unfocused comments are like missiles or rockets fired aimlssly into the big blue sky! Please reconsider. I believe with your gift and well known positive beneficient disposition, people, including those concerned, will not take unkindly to an honest opinion/viewpoint, and if they have any counter-points all the more better if they reply for all of us to judge.
I have grown tired on the G wonderful policy. I believe what most Singaporeans should do is to work hard and find opportunity to leave this miserable place. If the society cannot change the crazy policies, end it yourself then. I believe most of us do not want to see ourselves working to death and tighten our belts to boast economy while our great people like … enjoy high salary and fat bonus for THEIR “successful policy”.
Mr Tan,
I dont think a happiness index is useful gauage. I rather empahise that MPs and Ministers should automatically get pay cuts if they screwed up badly. If they screwed up very badly they should even resigned without hiding behind PM ’s back. They should have backbone and not be spineless creatures.
Just like bad investments, stupid policies and the unexpected budget surplus and many more like Mas Selamat Escape from detention centre are examples that Ministers should have the courage to demand their own resignation or pay cuts.
These group of elites thought they are untouchables and are totally out of touch with common folks. They do no worth millions at all. They are not talents to me. If they have the foresight we do not need IRs and relied on tourism as an important industry. Even the Educational HUB has failed miserably with UNSW exiting SG.What has EDB done that can jolly well said JOB ACCOMPLISH? Biomedical industry? We should be saying how much we have invested and what are the returns? I think MR Tan can do some research on how effective and efficent of EDB in executing their policy. How much money are burned and the returns?
Happiness index is a good gauage only if we can poll every singaporeans every year to measure how our leaders performed. That will be very time consuming but a good indcators of how situation in SG is progressing, Stop paying them millions from tax payers money.
Dear George (10.14 am)
I have a policy to avoid making judgment on or evaluating specific people. To do this properly, I have to get the relevant facts (which is difficult to get). It will be wrong to pass any judgement based on incomplete or unreliable facts.
I prefer to comment on specific matters. I give the facts and make my observations. Other people can present new facts and give their views or a different perspective.
If we are able to consider different points of views, we can make a better judgement and find a better way.
I hope that, through theonlinecitizen, many issues can be considered in a broader perspective. I also hope that we can find a better way of doing things, including new ways that come “out of the box”.
Hi Fever Guy
On reflection, the title does not seem to relect clearly the content of my article, although I did approve it.
My paper said that government leaders should be paid 10 to 20 times of the national average salary. Their performance should be measured on the national happiness index. If they fail to make people happy, they should be removed.
Tan Kin Lian, I really enjoy your articles, they are insightful and most importantly they contain unbiased views unlike the MSM.
Actually there is a “happiness index” already in place. It’s called the election process held every 4 years. Maybe we Singaporeans should also blame ourselves when we approve incompetent ministers during these election processes.
Dear Mr. Tan,
I concur with you completely on the need for passion to be able to do a good job without overly high renumeration. I also agree with you completely that if we cannot find such good people in a society then there is something very wrong with the values of that society. My view is that if a person needs a very high pay in order to be willing to do the job then that person is simply not suitable for the job, especially if it involves serving the people.
Hi Jackson Tan
You said …. but I think it can still become a victim of the “money politics” problem you raised. There are always short-term ways to raise happiness, such as establishing lavish welfare schemes or drastically lowering taxes, but the drawback may come only decades later.”
This is the line of reasoning used by the PAP leadership to discredit any suggestion to consider any form of welfare or reduction of tax (e.g. GST or petrol tax). The argument goes, “if we spend money recklessly, we will be bankrupt one day”.
Leaders must be prepared to make decisions appropriate to the times. The current high inflation needs measures to ameloriate the impact on many people. There is a case for petrol tax to be reduced, GST to be reduced and for a bigger cash payout under something like a new “Progress Package”.
I am not suggesting that we continue the welfare, reduced tax or cash payout until the nation becomes bankrupt. I am sure that our leaders will know the right time to discontinue these measures.
I agree with the approach of our leaders to avoid subsiding the price of essential commodities, such as rice, electricity. petrol, and to give a cash payout to help people to meet the higher cost.
I also like to acknowledge that they have done a good job in looking for many sources of supply around the world, and to have a cooperative like NTUC Fairprice to help to prevent profiteering by retailers.
It is usually better for leaders to be feared and disliked in order to get the job done… rather than to be liked or at least tolerated, but cannot get the job done. Just look across the causeway for an incisive illustration of the latter option unfolding.
That’s the most silly piece of article I have ever read.
Consider the final sentence of Mr Tan’s article: “The performance of a government is best measured by the happiness index. If the majority of the people are happy, they are more likely to re-elect the existing government.”
Based on this logic, the PAP government deserve to be re-elected for the past forty odd years because they make the people happy. Is this true? Or simply the fact that they have no choice at all.
It is going to be quite difficult to do this;
!. How are you going to quantify happiness and
2. By doing so will it provide a better standard to measure up to for ministerial salaries?
People derive happiness from either materially or immaterially, a poem can satisfy the mind and give one happiness. However, happiness can also be derived from other forms. Drugs also can bring one happiness albeit temporarily, and as such would our ministers be coerced into catering to our preferences? It would be bad for us if our ministers were to cultivate our hedonistic tendencies. Like before pegging it to the private sector, leaders would be driven to make more money, would our ministers strive towards giving us the most happiness? When we arrive at a moment in time, where one must make the most difficult decision, and that decision entails creating a lot of unhappiness, would the ministers be able to do so and accept the salary cuts?
Happiness is more of an arbitrary quality than a quantity. Can we really put a scale to happiness? Happiness being so subjective furthermore can we accurately gauge everyone’s happiness and say that if it reaches past this level then the minister has proven his worth? This is important as if we cannot get an accurate reading and have to settle for a very close estimate, it would not be fair to the ministers or the citizens. In addition to that, can we be certain that the result will not be biased towards or against?
It is a misconception there is some form of linear relationship between happiness and money. A poor family can also achieve happiness just as easily as a rich family. Some people are much more easily satisfied and thus happy. So going along this line of reasoning, would it be possible to have a country with happy and contented but poor people? As such would the ministers be justified in paying themselves more? Like in Bhutan of which this Gross National Happiness came from.
Likewise, if you are going to peg the ministerial pay to a “happiness index” and couple it with the national mean wage multiplied by a factor of 10 -20, why is it not possible to link the ministerial salary to the “happiness index”. Which is to say, if the overall populace is satisfied, then the minister gets paid a fixed salary (that is not allowed to move freely upwards) and then gets rewarded by the “happiness index” (i.e. nothing but thanks from the citizens). This is also known as job satisfaction.
Public service is not always about bringing in the greatest amount of wealth or happiness to a country, there are brilliant people in the private sector to bring in the wealth. It also helps if there is a good judicial system and a free market economy with suitable monitoring agencies. Public service is about emancipating those who do not have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others. In addition, there should be fair equality of opportunity.
What and how do we deem fair compensation for those in the public sector I do not profess to know, and until we find a suitable format it will always be a subject for many more discussions.
Such an index actually exists. It’s called the Happy Planet Index.
Singapore ranks 131th, after less-developed countries that includes Cuba, Cambodia and Pakistan.
See: http://en.wikipedia.org/wiki/Happy_Planet_Index
kimbuaysong has a point as not everyone has a chance to vote due to the high numbers of walkovers. To increase the participation, perhaps we could consider inviting the newly arrived foreign talents and grateful foreign workers to cast their votes too.
Dear Kin Lian,
diplomacy works only with culture and education. Of the latter apparently today’s leaders hold a goodly amount of or at least lay claim to that.
Linking the pay of government leaders to the national average will not help the poor and the lower income group. As suggested by one of the opposition member some time back, their pay should be linked to the lowest paid. Say, pay the leaders 100 times (or even 200 times) the average pay of the bottom 10% of wage earners or the 10th decile. This way, they will be forced to improve the pay of the low income people. It is still possible to muck around the numbers to increase their own pay, say, by instituting a minimum wage system and other such devices to artificially increase the low pay. However, there is a limit on this sleigh of hand as the other tiers will also go up. Even so, we would have already achieved the noble aim of helping the poor and a degree of leveling up.
However, the fact that this has been suggested by an opposition member before will almost mean it will never be considered. It is a kiss of death…
It is a fact that many ex-ministers have gone on to become chairpersons in top blue chips companies and deservingly so, commanded excellent salaries. That would have been the ultimate reward by itself, and the magnet to get talents to scramble for public office, knowing that a greater future beckons for the subsequent progression of their career. As for their time in public service, the ministers should just be paid nominal token pay, like our NS men. Their position is afterall, a privilege that many would fight tooth and nail for.
majulah singapura !!! 3 yrs to go to leaving this sick place and i’m very happy about it. going to a more human-orientated country and not treated like ‘digit’.
Each minister have a different portfolio, and I would not suggest using any ONE single index/method to judge them all. e.g MOM should be link to unemployment ratio; MOT maybe linked to average speed on highways, density of public transport network; etc
For the PM, MAYBE the happiness index will come in. Though i’d prefer that he based his salary on the performance of his ministers whose in turn depends on quantifiable KPIs in their respective areas.
Government leaders have a job to do. They cannot be held hostage to popularity polls.
Really ? Then what are elections for popular votes for ? Why almost every country (well, almost) officially wants to go through the process of elections and officially wants people to know that their elections are free and fair ?
Mun Kit,
I think it is fairer and workable idea. For Defence minister it will be based on a few pointers such as low fatalities in peacetime, training to cost ratio and budget controls. Of course i not hoping for WARTIME performance.
As for MHA, Low Crimes, No more blunders and Custom Effectiveness in preventing smuggling of illegal stuffs, capturing FT “chickens” sending them back to mainland china and recapture of MSK. If not WKS better don get any bonus.
For health minister, lesser waiting time to see a doctor in hospital, patient happiness index, treatment to cost ratio, more well trained doctors, staffs and beds.
FG
Do these top talent million dollar ministers have the guts to implement such an index? They are so scared and lazy to face scrutiny.
I just visited Jogjakarata. My friend told me that the Sultan, who is also elected as the Governor, is very popular and highly respected. He has high integrity and looks after the interest of the people. Many people want him to stand for election as President of Indonesia, but he declined.
This idea is copied from WP chairman Slyvia Lim
Hi Xerox
I did not copy my idea from anybody. It came from my own writing. It is nice to know that some other important people share the same idea.