No moral authority

If only SSS management had some moral authority, it should be easy to understand why P-Noy had to veto that proposal to increase SSS pensions. The math is pretty straightforward. But there are valid issues about SSS management, the record earnings of the trust fund notwithstanding.

Not too long ago, the Commission on Audit ordered SSS officials to return to the government over P71.612 million in unauthorized bonuses. An appeal was made and was rejected as the order was deemed final. But have SSS officials returned the illegal bonuses or even made an attempt to comply?

Then there is the issue of compensation packages that are much too generous. Worse, there is a platoon of high SSS officials 2 EVPs, 7 SVPs, 16 VPs and who knows how many senior managers. Based on published figures that probably exclude perks, SSS officials are getting compensation that’s more than competitive with the private sector.

Some questions come to mind. Does SSS need all those EVPs, SVP’s and VPs? When I was working for PNOC/Petron, we had less than ten such officials and our operations were so diverse (oil upstream/downstream, coal mining and trading, drilling, geothermal, shipping, shipbuilding, etc), that would justify having more senior officials. What do all those senior officials of SSS do to justify their compensation?

Then, there are the directors who get extremely generous compensation too for attending board meetings… as much as P40,000 a meeting. The figure exceeds what other more profitable companies in the private sector give their directors.

Maybe they are trying to compete with counterparts in GSIS. I understand GSIS directors get as much as P8 million a year plus car and driver, etc. That too, seems anomalous.

Looking at the list of directors in both systems, I notice a lot of names who really do not need to be compensated that much. Many are retired and having made their money already, should be there solely for public service.

Published compensation figures also do not include what they earn in actual money terms and perks from private corporations where the two systems have board seats. This is why these directorships are much sought after by friends of whoever is in power in Malacañang.

Highly paid as they are, the SSS board members failed to deliver value for money in terms of wise counsel, innovative ideas. Makes one wonder what they talk about in board meetings.

Indeed, I blame the SSS board for failing to anticipate the problem. They knew about the proposal, they knew it will pass Congress, they should have worked out an alternative proposal.

It seems the board members are too rich and out of touch with the needs of their members. They failed to see that the pension SSS gives is very inadequate. Or maybe they just didn’t care.

Protecting the viability of the fund is fine but the current system is obviously inadequate. They failed their members, they failed P-Noy, their benefactor who appointed them.

Ironically, SSS officials and staff are members of GSIS and get far more benefits than what SSS members get. That should have been their starting point. Why is it like that? How can they fix the disparity?

Maybe we should just have one social security system to cover government and private sector workers. There should be no distinction as is the case in many other countries.

Maybe we should privatize social security. Rogelio Paglomutan, a business professor who once worked in Chile, pointed out to me how the South American country successfully privatized social security. He posted an article on the Chilean system on my Facebook page that explained it.

“Chile’s 30-year experiment is succeeding beyond expectations. Instead of running huge deficits to fund the old ‘PayGo’ system, private savings now exceed 50 percent of the country’s Gross Domestic Product.

“Prior to May 1, 1981, the Chilean system required contributions from workers and was clearly in grave financial trouble. Instead of nibbling around the edges to shore up the program for another few years, José Piñera, Secretary of Labor and Pensions under Augusto Pinochet, decided to do a major overhaul of the system.

“We knew that cosmetic changes — increasing the retirement age, increasing taxes — would not be enough. We understood that the pay-as-you-go system had a fundamental flaw, one rooted in a false conception of how human beings behave. That flaw was lack of a link between what people put into their pension program and what they take out….

“So we decided to go in the other direction, to link benefits to contributions. The money that a worker pays into the system goes into an account that is owned by the worker.

“The system still required contributions of 10 percent of salary, but the money was deposited in any one of an array of private investment companies. Upon retirement, the worker had a number of options, including purchasing an annuity for life. Along the way he could track the performance of his account, and increase his contribution (up to 20 percent) if he wanted to retire earlier, or increase his payout at retirement.” How did the privatized system work out? “According to Investor’s Business Daily, the average annual rate of return for Chilean workers over the last 30 years has exceeded nine percent annually, after inflation, whereas US Social Security pays a one percent to two percent (theoretical) rate of return, and even less for new workers.

“As expected, the capital accumulated in these privatized accounts has generated substantial growth in Chile’s economy… Chile is one of South America’s most stable and prosperous nations, leading Latin American nations in human development, competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.

“High domestic savings and investment rates helped propel Chile’s economy to average growth rates of eight percent during the 1990s. The privatized national pension plan has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 21 percent of GDP.

“This was anticipated by Piñera when the plan was originally designed and implemented in 1981. In reviewing the success of the plan after just 15 years, Piñera said, ‘The Chilean worker is an owner, a capitalist. There is no more powerful way to stabilize a free-market economy and to get the support of the workers than to link them directly to the benefits of the market system. When Chile grows at seven percent or when the stock market doubles … Chilean workers benefit directly, not only through high wages, not only through more employment, but through additional capital in their individual pension accounts.’”

Maybe privatizing our social security funds is too drastic for some people. There must be other things that could be done to tweak our current system. One thing is sure… something has to be done to make the benefits more meaningful. At current levels, very little help is given to those who need such help the most.

Maybe there is a need for government to infuse some money into SSS to cover increased pensions because contributions alone cannot afford it. This seems to be what some critics are saying when they invoke social justice. They see no difference between government and SSS funds and therefore cannot see why we should be concerned about the longevity of the fund.

Indeed, the World Bank made a recommendation way back in 2006 to address needs of poor retirees. “The Government should consider the merits of a universal or needs-based pension, paid from general state revenues, to complement existing pension programs, in order to expand coverage and reduce elderly poverty. An eligibility age of 70 or even higher should be considered. Poverty data needs to be improved to facilitate analysis of this issue.”

SSS was one of the government agencies I covered when I was a young reporter. It was headed by Gilberto Teodoro, the father of Gibo. He had a reputation as a tough administrator, which incidentally was his unglamorous title, not President or EVP or SVP. But that’s what the head of SSS should be: an administrator.

Mr. Teodoro protected the integrity of SSS funds like a hawk. I heard a story that he often threw out requests for funds even from Imelda Marcos. Best of all, he was not flashy. If it was Mr Teodoro who was at the helm of SSS today, we will not see this crisis in confidence. That’s because he held the moral high ground.

I don’t know if they can still clean up SSS operations in P-Noy’s remaining months. But they better start doing something to win back public support. They need to win back moral authority or have the decency to quit their jobs to let a new crew do what they failed to do. Boo Chanco’s e-mail address is bchanco@gmail.

com. Follow him on Twitter @boochanco.