Press Release
March 17, 2011

Senate approves GOCC bill

The Senate on Wednesday night approved a bill that will reform the structure and operations of Government-Owned and Controlled Corporations (GOCCs).

Sen. Franklin Drilon, principal author of Senate Bill 2640 or the proposed GOCC Governance Act of 2011, said the measure aims to improve the governance of GOCCs and to exact from them efficient and effective public service. The bill proposes the creation of the Government Commission for GOCCs (GCG) which will act as a central advisory and oversight body composed of a chairman with the rank of a Cabinet secretary and two commissioners with the rank of undersecretary, all of whom shall be appointed by the President.

"The need for much-needed reforms in the government corporate sector to make it an effective vehicle in achieving social and economic progress becomes more apparent once we take into account the role that GOCCs play in our economy," Drilon explained.

Drilon introduced an amendment in the bill which will require GOCCs to submit a proposal to the GCG for review and approval if they plan to acquire another entity, following the Local Water Utilities Administration's acquisition of a bank without prior regulation.

The council will be responsible for developing a Compensation and Position Classification System which shall apply to all officers and employees of the GOCCs.

The chief executive officer as provided in the charters of GOCCs shall be nominated by the President. All incumbent CEOs and appointive members shall hold office until their successors shall have been appointed.

Reports showed that top officials and board members of certain GOCCs had received excessive and unwarranted salaries, allowances, bonuses and other perks amounting to millions.

Representatives of the Social Security Commission (SSC) to the Board of Directors of Philex Mining, for instance, earned about P55 million by way of stock options in addition to their bonuses. On the other hand, the Metropolitan Water and Sewerage System gave its board chairman a P5 million bonus in 2009 and granted 25 bonuses in one year despite incurring a P3.5 billion loss in 2008.

"The days when the GOCC boards can act independently of the national government are over. We are confident that once this bill becomes a law, the excesses and abuses we saw in the operation of the GOCCs will be a thing of the past," Drilon said.

Drilon said that earnings from the GOCC will significantly reduce the government's budget shortfall and help the President's program of improving the economy without imposing new or additional taxes. Compensation, per diems, allowances and bonuses of the members of the board of directors/trustees of state firms shall be determined by the GCG. The measure further provides that directors/trustees shall not be entitled to retirement benefits as such directors/trustees.

Upon determination, the GCG shall implement the reorganization, merger or streamlining of the GOCC and recommend to the President the abolition or privatization of the GOCC.

Drilon earlier cited a study which showed that the patronage system practiced by GOCCs by granting senior managerial positions to retired military and high level civil servants or relatives and friends of powerful politicians has led to inefficiency, low levels of productivity and financial losses.

Drilon said that as mere trustees, GOCC directors and officers who breach their fiduciary duty will be made liable for any profits they will misappropriate to themselves. They will also be required to remit to the GOCC any such benefit or profit, he said.

Officials who received excess compensation or allowances will be required to restitute the amount involved within 30 days, which was introduced by Drilon as part of the committee's amendments.

"If they fail to do so, administrative, civil or criminal action will be filed against them. The penalty of imprisonment and a fine twice the amount will be imposed on them," he said.

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