Big losses but huge salaries – is it acceptable?


VietNamNet Bridge – Tien Phong Daily has roused the public by its revelation of the towering salaries of officials at some money-losing state-owned companies. VietNamNet Bridge summarizes the series.

A record-high salary

Deputy Minister of Finance Tran Van Ta retired in 2007. Immediately afterward, he was appointed the General Director of the State Capital Investment Corporation (SCIC).

The SCIC's headquarters in Hanoi.

The SCIC's headquarters in Hanoi.

At a ceremony marking the SCIC’s funding by three state-owned firms subordinate to the Ministry of Agriculture and Rural Development last year, Ta observed that though he reached the age of retirement, but he was not allowed to rest, but instead he had to assume the great responsibility of managing a new model corporation with many challenges.

At that time, some commented that Ta must have been very self-sacrificing to assume this difficult mission.

A recent report of the State Audit Agency (SAV), however, shows that Ta’s annual salary is at least 942 million dong (about $51,000), more than ten the salary of general directors and chairmen of major state-owned economic groups.

Why was Ta paid so much?

In 2008, SCIC argued that it had to recruit expert staff with foreign language skills and 5-10 years’ experience to do difficult jobs, so it asked for and was granted permission to pay staff at a higher salary level. In addition, its number of its employees is much lower than the approved plan of recruitment. SCIC has authority to employ 180 staff members but it had only 130.  For these reasons, the pay for SCIC’s workers is very high in comparison with other state-owned companies.

The Ministry of Labour, War Invalids and Social Affairs (MoLISA) agreed that SCIC could use 10.38 dong from each 1000 dong of income to pay salaries.  According to SCIC’s salary plan for 2008, the total fund for salaries is 21.9 billion dong (nearly $1.29 million).

Remarkably, the MoLISA approved this plan on September 12, 2009, at which time that it could have known about the actual situation at SCIC. It didn’t check, however, and approved SCIC’s plan.

MoLISA authorized SCIC to use 1.473 billion dong (nearly $87,000) to pay the salaries of SCIC’s management board and general director but in fact this corporation paid nearly 2.7 billion dong in salaries, not including bonuses and other emolument.

In the workplan it submitted to the MoLISA and the Finance Ministry, SCIC proposed a monthly payroll of 40 million dong ($2350) for members of the Management Board and the General Director. Their pay in fact reached 78.5 million dong per month on average, 1.96 times higher than stated in the approved plan.

The State Audit of Vietnam Agency says that income allocation is problematic when the pay for top officers is many times higher than that of employees, as at the SCIC.

The available data shows that employees were nicely compensated, too. The average income of department chiefs at SCIC was 29 million dong per month ($1600 at the current exchange rate) and it was 12.4 million dong for ordinary employees.

Some officials were paid twice. In 2008, SCIC designated 18 employees to join the management boards and control boards of companies to which SCIC contributed capital.  These people were paid by SCIC and also by the companies where they represented SCIC, and collectively earned an extra 949 million dong in 2008.

SCIC had its own unique way of using this last sum.  Sixty percent of it (451 million dong) was added to its trade union fund and 40 percent was allocated directloy to these staff.

Auditors have called this illegal and instructed SCIC to pay to the state budget the 451 million dong from its trade union fund.  They also proposed to deduct 3.8 billion dong from the SCIC’s salary fund in 2009 to compensate for excessively high 2008 salary payments.

According to auditors, a benevolent Finance Ministry and the MoLISA paid SCIC staffs too well. They asked the Finance Ministry to instruct SCIC’s officials to clarify which individuals were in charge of designing the salary plan and allocating salary in 2008.

The state owns 76%, but can’t control Jetstar salaries


Since its establishment in 1991, Jetstar Pacific Airlines (JP) has never earned a profit. Its losses reached a record level in 2008, 546 billion dong ($32 million). In that same year, JP’s Vietnamese officials received a billion dong in salary while a foreign deputy general director earned more than 5 billion dong.

JP’s capital is contributed by four shareholders.  In December 31, 2008, its shareholders were SCIC (490 billion dong of paid-in capital or 76 percent), Qantas Asia Investment Company (116 billion dong,18 percent), Saigontourist (40 billion dong, 6 percent) and former General Director Luong Hoai Nam 200 million dong (0.04 percent). Nam bought the shares from one of the other shareholders.

Also by December 31, 2008, JP’s accumulated losses were 1,137 trillion dong and its stockholder equity deficit had reached 121 billion dong. This airline suffered the extraordinary loss in 2008 because it guessed wrong in a bet on the future cost of petrol.  JP has continued to post losses — up to $31.2 million from July 2008 to May 2009, including $8.9 million for 2008 and around 22.5 million from January to May 2009.

The State Audit of Vietnam Agency judged that JP’s executive board didn’t obey the instruction of the management board, and the board didn’t closely supervise the effort to hedge petrol costs, leading to a huge loss for the company.

While taking these losses, JP’s officials earned towering salaries. The remuneration of its chairman of the management board soared from 360 million dong in 2007 to 986 million dong in 2008.  The general director earned 444 million dong in 2007; his salary jumped to 2.2 billion dong in 2008. The pay for two Vietnamese deputy general directors was nearly one billion dong in 2008. Two foreign deputy general directors were paid at an annual rate of 5.1 billion dong and 4.0 billion dong that year.

There’s no explanation why the salaries for officials of a loss-incurring company like JP skyrocketed like this. “It is unacceptable! Executive directors at state-owned enterprises must step down if their companies take losses for two consecutive years,” commented an official of a state-owned group.

Auditors instructed SCIC to make clear the responsibility of individuals and the management board of JP in its missed bet on petrol prices and to review the salary for officials of JP since 2007.

However, Tong Thi Minh, chief of the MoLISA’s Labour-Wage Department, explained that according to regulations, the salary fund of joint stock companies is decided by the shareholders’ meeting and the pay for officials is decided by the management board.  On the management board, the representative for state-contributed capital has only one vote.  In other words, even when the state owns the majority of shares in a joint stock company, it can’t intervene in salary payment.

It appears, therefore, that the management of SCIC and JP took advantage of loopholes in the law to reward themselves handsomely even though their companies operate ineffectively.

SCIC currently holds shares at over 800 companies, mainly state-owned. If all these firms pay salary like JP, comments Tien Phong, the state would very soon be empty-handed.

What are the salaries at other state-owned groups?

The state manages salaries at state-owned groups in the following way: annually, companies calculate a total amount for salaries based on the business results of the previous year and submit the plan to the MoLISA and the Finance Ministry. Based on this approved salary plan, companies may allocate the funds according to their own rules.

At the Vietnam Coal and Mineral Group (Vinacomin), the average income of 13,000 workers is over 4.3 milllion dong per month, according to a recent auditing report.

The director of a subsidiary of Vinacomin said that the highest salary in any of the Vinacomin companies may not be more than 22 times the lowest, in case the company’s profit 5 percent higher than the previous year.

“The monthly income of Vinacomin Group chairman Doan Van Kien is around 40 million dong. It’s nearly 40 million dong for the general director and 30 million for members of the management board and deputy general directors,” this official said.

He said that as the director of a subsidiary, he earns over 20 million dong a month. The income of Vinacomin department chiefs is also around 20 million dong per month.

The Deputy General Director of the Electricity of Vietnam Group (EVN) subsidiary in Quang Tri province said that the income of this group’s workers is not as high as people think. The average income for 84,000 EVN employees is around 3.9 million dong a month. The pay for top officials is around 4-5 times above that average.

Tri said that the group has lost a lot of talented people due to its payment mechanism and this is a problem for EVN.

A former deputy general director of EVN said that according to regulations, the salary for officials is not allowed to exceed nine times’ the pay of a staff member.  The earnings of a department chief cannot be more than five times the pay of professional staff and the experts’ pay cannot be more than four times the pay of normal employees.

However, the salaries of top officials of state-owned economic groups differ depending on their position, their qualifications and their performance.

According to this former official, a department chief at EVN earns from 17 to 18 million per month and a deputy department chief from 12 to 13 million. “This level of salary is high in comparison to the common level but not high compared to the oil and gas (Vietnam Petroleum and Gas Group), aviation groups (Vietnam Airlines) and VNPT (Vietnam Post and Telecommunications Group),” he said.

According to Tien Phong’s survey, the current pay of a deputy general director at EVN is over 20 million dong per month and its chairman is paid over 30 million.

Vu Ngoc Hai, chairman of the Vietnam Petroleum Import Export Corporation (Petrolimex), recently told reporters that though the corporation makes the biggest contribution to the state budget, the average income of its staff is only 3.6 million dong per month. Hai, as the corporation’s chairman, earns only 17-18 million dong a month. The pay for the general director and deputy general director is several million less than Hai.

At the Military Telecom Corporation (Viettel), staff don’t know each other’s income. On average, employees who have worked for Viettel for several years earn around 10 million dong a month. A division chief disclosed that he earns more than 30 million dong per month.

It is strange that though the monthly income of staffs at state-owned groups is legitimate, it is not public information.

A Tien Phong reporter contacted an official of the VNPT to ask about salary. The official answered “I’ll tell you when there’s a convenient opportunity.” Some officials at other groups also refused to talk about salary and bonuses.

Source:  VnNet


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