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Editorial | PAJ’s case for reformed governance

Published:Sunday | August 7, 2016 | 8:00 AM

The report by the Auditor General's Department showing oversize pension payments and unauthorised golden handshakes to the top bosses of the Port Authority of Jamaica (PAJ) is a scandal not only for its seeming brazenness, but for the apparent abandonment of fiduciary responsibility by the agency's governors, for which, even at this stage, they should be asked to account.

The auditor general's report, notwithstanding its shortage of specific details, also makes a compelling case for the restructuring of the PAJ, and similar bodies, including the National Solid Waste Management Authority, to decouple their regulatory and commercial functions. Additionally, it adds force to this newspaper's oft-repeated dislike for executive chairmanships at state-owned enterprises and institutions, which concentrate too much power in the hands of a single individual.

The PAJ, it is recalled, is the agency that oversees port development and operations in Jamaica. But it also owns ports and related enterprises, including the Kingston Container Terminal, which it recently divested to the French consortium, Terminal Link-CMA/CGM, under a 30-year concession. It is one of the few government entities that, for the most part, pays it way.

Indeed, in four of the five years, between 2010-11 and 2014-15, for which the PAJ was subject to the auditor general's review, the authority returned substantial profits. In that sense, it may be argued that, in the context of Jamaica, it can afford to pay its executives well, which it apparently did.

 

GUIDELINE BREACHES

 

That, however, is beside the point if it breaches laws and official guidelines for how state entities can compensate their staff. In the case of the PAJ, the auditor general determined that in the case of 14 top managers over the review period, it overpaid them J$15 million in gratuities because it did not follow the guidelines for the calculation of such benefits. There were other breaches of the guidelines to the benefit of managers.

But the more egregious discovery was how it handled retirement and golden parachute payments to an unnamed executive who, in October 2013, received the entire US$544,164 that remained in a special fund that was established for three top managers, but was terminated because it had not received approval from the finance ministry. This same officer - who, it appears, already had an older pension based on a J$120,000 lump sum payout and J$35,000 monthly - was separately in receipt of a $56.2-million pension, plus gratuity of J$31.33 million on contracts.

The auditor general could not conclude the rationale for the payout to this manager, and whether there were claims from two colleagues who were among the originally intended beneficiaries, and, if not, why. Nor is there any explanation of why the PAJ board sanctioned the payment and the other breaches identified by the auditor general.

If the answer was that they were ignorant of these goings-on, that would be inexcusable, for which, in a private firm, it might have been cited for failing to apply "due care, diligence and skill" in the exercise of their duties, or, perhaps for "misfeasance or breach of fiduciary responsibility". Indeed, such obligation for due care should be an obligation for the governors of state agencies and enterprises.

Additionally, the competing roles of regulator and commercial enterprise ought not to reside within the same entity, no matter how clear-eyed or skilled its managers. Further, when executives have authority over their boards, as is the case when its manager is also chairman, there is the danger of diminished accountability.