The Philippines is consolidating state-run corporations in hopes they would attract and retain top talent by being competitive with private-sector salaries.
The Organization for Economic Cooperation and Development (OECD) group of rich nations noted in a Dec. 11 report that the Philippine government is currently reviewing the compensation and position classification system (CPCS) for state-owned enterprises (SOEs) or locally known as government-owned and/or -controlled corporations (GOCCs).
Citing the Philippine government's responses to its questions, the OECD reported that the number of GOCCs in the country dwindled to 118 this year from 158 in 2011 amid closures of loss-making corporations, mergers, as well as privatizations.
"The Philippines is currently reviewing, with the help of an external evaluator, the compensation provided under CPCS, which includes the compensation levels of executive management. This review is done pursuant to Section 9 of Executive Order (EO) No. 150, which calls for the review of the CPCS every three years," the OECD said in its "Remuneration of boards of directors and executive management in state-owned enterprises in Asia" report.
"The review of the CPCS takes into account the performance of GOCCs, their overall contribution to the national economy, and the possible erosion in purchasing power due to inflation and other relevant factors," it added.
The long-delayed CPCS aimed to establish a competitive compensation system while ensuring GOCC's financial health.
The OECD noted that in the Philippines, the Governance Commission for GOCCs (GCG), together with the departments of Budget and Management (DBM) and of Finance (DOF), puts in place as well as pitches GOCC executives' remuneration policies, including incentives, to the Office of the President.
The DBM and DOF chiefs are ex-officio members of the GCG.
"India, Indonesia, the Philippines and Vietnam have initiated privatization efforts to make their SOE sectors more competitive. This shift could potentially have a positive impact on remuneration for SOE boards and executive management, as it could create an opportunity to align remuneration more closely with private-sector standards," the OECD said.
In the Philippines, the OECD cited that GOCCs "play a significant role in key sectors such as hydrocarbons, manufacturing, finance, telecommunications, energy, transportation, utilities (including postal services), and real estate."
"Under the GOCC Governance Act of 2011, they conduct both commercial and non-commercial activities, contributing to national development by providing essential public services and infrastructure. [GOCCs] may also be tasked with promoting social stability by creating employment opportunities," it added.
However, the OECD pointed that compensation and remuneration for GOCCs "remained unchanged since 2011" when Republic Act (RA) No. 10149 took effect, adding that "the GCG oversees executive compensation, including both fixed and performance-based components, with boards having limited room to adjust pay within this framework."