Last week, lawmakers at the Economics Committee decided to limit employee bonuses at state-run companies during unprofitable years, after the government’s generous bonus payout plans raised eyebrows among the public at a time when many state-owned companies are still deep in the red and the nation’s economy is not performing well. Lawmakers reached a consensus to cap such bonuses at 1.2 months’ salary, rather than the original 2.6 months.
Employees of state-run companies can usually receive annual bonuses composed of two parts: A maximum of up to 2.6 months’ salary awarded based on the company’s performance and a maximum of up to two months’ salary based on employees’ performance. Under the new deal, which will save the nation’s coffers as much as NT$28 billion (US$970 million) a year, the upper limit of employees’ annual bonuses will be lowered to 3.2 months’ salary from the original 4.6 months.
The government tried to argue that employees at state firms deserve hefty bonuses, but the general public believe that companies, whether state-run or privately owned, distribute bonuses because they are making enough money to share their earnings with employees. However, what people have seen from the five state-run companies, especially refiner CPC Corp, Taiwan, and utility Taiwan Power Co (Taipower), are not only heavy deficits, but also inefficiency.
The government said bonus cuts would make it harder for state-run companies to recruit or retain talent, but the general public see such statements as implying that bonuses are not awarded based on performance, but instead are an insurance against employees leaving for private firms.
Employees at state companies have reason to be angry, as they have become scapegoats for the poor performance of management and the government agencies to which they report. However, some union representatives’ threats to strike over the bonus issue have caused feelings of unfairness among the general public, who pay taxes to keep their companies afloat. No wonder people are furious and want to protest in the streets today.
The bonus dispute has exposed the fat salaries at state companies and reminded people of the perennial issue of their lack of competitiveness. It has re-raised questions as to when the government will overhaul or even privatize these companies.
For more than a decade, the government has repeatedly vowed to push forward reforms for state companies in the face of mounting criticism by the public. Over the years, we have seen the government take no initiative on this issue, instead playing catch-up by offering a patchwork of belated measures — some measures for the companies’ internal management here, some for their procurement practices there, and others focused on their investment projects.
It is clear that the government’s reform efforts have so far proved ineffective and the biggest problem is an inability to overcome obstacles posed by strong vested interests in such companies. One has to wonder how the government can ever move to turn these companies into private entities if it lacks strong leadership and determination.
About 30 years ago, then-British prime minister Margaret Thatcher was harshly criticized for a policy of privatizing state-owned industries, but nowadays it seems clear that she achieved something that would have been unthinkable before and her accomplishments have had a long-term impact on the British economy.