[No. 179] Renumeration and The Public Sector

In post No. 136 I wrote about the possibility of a bonus frenzy in the public sector, based on research showing that the amounts paid aren't de minimis. The list of the 25 biggest bonuses paid in organizations that are either funded through tax related funds or are supposed to pursue societal goals - think of hospitals, health treatment facilities, schools, public housing institutions and the like - ran as follows.

Top 25 hoogste bonussen in de (semi)publieke sector

1. Jachtvlieger defensie*, bindingspremie (gedeeltelijk), €79.865
2. Frank Bijdendijk, bestuur woningcorporatie Stadgenoot, €68.881
3. Peter van der Meer, voorzitter M.C. Haaglanden**, €62.652
4. Willem Geerlings, bestuur M.C. Haaglanden**, €61.329
5. Eelco Damen, voorzitter Cordaan (thuiszorg), €50.000
6. Haijo Pietersma, ex-voorzitter A. Schweitzer Ziekenhuis, €44.097
7. Leen Pijpers, ex-bestuurder A. Schweitzer Ziekenhuis, €41.576
8. Secretaris-generaal op een ministerie*, bindingspremie, €39.697
9. Douwe Hemrika, voorzitter OVLG Ziekenhuis, €38.715
10. Roel Steenbeek, voorzitter woningcorporatie Ymere, €37.120
11. Ber Bosveld, bestuur woningcorporatie Ymere, €37.120
12. Lex Pouw, ex-voorzitter woningcorporatie Ymere, €35.324
13. Geert Dales, ex-voorzitter Hogeschool INHolland, €34.040
14. Huib Pols, bestuur Erasmus Medisch Centrum, €33.000
15. Bert Huis in ’t Veld, ex-voorzitter TNO, €32.540
16. Birgitte van Hoesel, bestuur woningcorporatie Portaal, €32.000
17. Hans Büller, voorzitter Erasmus Medisch Centrum, €32.000
18. Lein Labruyère, bestuur Hogeschool INHolland, €30.636
19. Joke Snippe, bestuur Hogeschool INHolland, €30.043
20. Yvonne Wilders, bestuur Spaarneziekenhuis, €29.597
21. Jan Mengelers, bestuur TNO, €29.208
22. Tini Colijn-Hooymans, bestuur TNO, €29.208
23. Harry Koopman, ex-voorzitter Avans Hogeschool, €27.241
24. Jim Schuyt, voorzitter woningcorporatie De Alliantie, €26.284
25. Charlotte Insinger, bestuur Erasmus Medisch Centrum, €26.250

* Naam onbekend
** M.C. = Medisch Centrum

Bron: jaarverslagen 2008 (NRC)

The largest amount was paid to an anonymous army fighterplane pilot, as a retention bonus: almost €80k. Apparently there's an international market for those people (I mean, how many competing airforces does one country have?). Some noteworthy findings of the inquiry are:

1. that hospitals and public housing institutions are among the big players in this bonus game;
2. that while many bonuses are ex ante linked to meeting pretty clear goals, the ex post level of accountability as to the ultimate payment is mixed (sounds familiar eh); and
3. that quite some bonus payments are merger related -- hey, we're not talking private sector M&A dynamics here, but covering these supposedly boring public sector vehicles.

Today, word came out - by two associations related to the public housing realm (see, e.g., here) - that 3/4 of the directors of public housing institutions are paid in line with the applicable governance code, that by the way doesn't cap renumeration at € 181.773 (the same annual salary of our prime-minister, which benchmark hasn't gone uncriticized) and was reviewed here. The fact that 1/4 of the directors doesn't go by the rules of the code has led to increased pressure to simplify the code, include a cap and make the code mandatory, also in view of planned legislation that should cover this subject.

This 'capping' element was included to some extent in the Banking Code 2009 (that covers renumeration of directors in banking institutions), but not in the Dutch corporate governance code (that covers renumeration of directors in listed corporations generally). Also at the international stage, the G20 stage to be more precise, no agreement was reached on capping bonuses in the for profit sector.

So the pressure on curbing 'excessive payment' is building not only in the for profit sector, but also in the public sector. One difference is that in the public sector, there seems to be a bit more willingness to go further than adding (some) guidelines for proper conduct or including some limitations on renumeration, and implement pretty hard and fast rules. This may have to do with the non-profit character of these organizations and the public sentiment about renumeration in the public domain, but also with the fact that the legislator is eager to take action here; things seem different in the corporate realm. The saying about 'the carrot and the stick' applies there, I guess.