Time to derail this gravy train

opinion June 19, 2014 00:00

By The Nation

2,615 Viewed

State enterprises have been used to reward political allies with lavish pay and perks for too long

State enterprises have come under fire over reports of the generous pay and benefits enjoyed by members of their executive boards – all funded, of course, by the taxpayer. Junta leader General Prayuth Chan-ocha has ordered the State Enterprise Policy Office to examine operations on all 56 state-enterprise boards, with the focus on benefits such as bonuses and meeting fees.
The ruling National Council for Peace and Order (NCPO) turned its focus on the state-run firms following revelations that benefits for their top executives exceed Bt10 billion a year. The NCPO is now seeking to scale back privileges for board members and also to cut staff expenses and bonuses at all state-owned enterprises. Individual board members can receive benefits to the tune of millions of baht every year.
Thai Airways International (THAI) and Airports of Thailand (AOT) are among the junta’s main targets. THAI board members enjoy lavish perks, including 20 free trips every year each and generous monthly and meeting allowances. Retired directors get a lifetime discount on airfare. AOT has faced harsh criticism for paying annual bonuses equivalent to 11 months’ salary and handing special privileges to its board members. The NCPO move is expected to staunch the bleeding at the national carrier, which logged a net loss of Bt2.6 billion in the last quarter.
Following the junta’s tough action, several board members – most of them with political links – have resigned from state enterprises PTT, Thai Oil, Krungthai Bank and Airports of Thailand. Among them are Krungthai Bank chairman Voravidh Champeeratana, Airports of Thailand chairman Sita Divari, PTT chairman Panpree Bahiddha-Nukara, Government Lottery Office director-general Police Maj-General Attagrit Tharechat and Government Housing Bank director Thanin Angsuwarangsi. More are expected to follow suit, with the ruling junta appointing their replacements. 
According to a Finance Ministry source, state enterprises have long been a source of benefits for people with political connections. Politicians in power often reward friendship and loyalty with directors’ posts. Many of the appointees are bureaucrats or executives of companies with political connections.
Most state enterprises are majority-owned by the state through the Finance Ministry, so lower running costs at such firms would mean increased revenue for the country.
After years of generous benefits and lavish spending, it’s now time for reform and belt-tightening at the state enterprises. Bonuses should be based on results, and the raft of perks for board members needs to be cut back severely. Such changes should help reduce the cost of operations, cut big losses and even increase profits.
It is good practice to reward board members according to their expertise and experience, but appointing board members simply on the strength of their close ties to those in power threatens the corporate health of state enterprises.
The NCPO should avoid the mistakes of the past by ensuring that new board members are appointed for their ability to contribute to state-owned firms, and not for their connections.