executive compensation

The Game of the Generals

As the nation welcomed the Year of the Rabbit with a bang, pyrotechnics were being set alight in the halls of Congress as the investigations into the Carlos Garcia plea bargain drew to a close. It now appears that Ombudsman Merceditas Gutierrez will seek the withdrawal of the deal before the Sandiganbayan graft court after she was prevailed upon by some eminent members of the august chamber of the Senate to do so.

Meanwhile Ms Heidi Mendoza, the former auditor who uncovered evidence of plunder by Garcia, is being hailed as a hero and enlisted by P-Noy for a senior appointment in the fight against corruption. Before she entered the scene, all it seemed had been lost. The Ombudsman said the evidence it had was not admissible in court making its case weak. Garcia was allowed to retain most of what was alleged he had stolen. Pleading to a lesser offense, he was allowed to post bail and was subsequently set free. Enter Heidi Mendoza, and everything changed.

It is rather ironic that Ms Mendoza, who holds a rank of lieutenant colonel as a reserve officer but normally works quietly behind a desk crunching numbers, should bring the military establishment to its knees. This is in contrast to Lt Antonio Trillanes IV who was all sound and fury. Having used the barrel of a gun (twice in fact during the Oakwood Mutiny and the Manila Pen Siege) to throw a spotlight on the condition of soldiers in the field, he and his cabal failed to effect any meaningful change save for getting himself elected Senator.

P-Noy who campaigned and got elected on a platform of anti-corruption (kung walang corrupt, walang mahirap) and prosecuting his predecessor for graft, was muddling through in this regard having a hostile Ombudsman to contend with and his Truth Commission declared unconstitutional by the Arroyo-appointed Supreme Court.

Yet when he announced his candidacy back in 2009, P-Noy who prided himself with being a trained economist demonstrated an understanding of the calculus of corruption and the tools required to counter it. The present case of corruption in the military demonstrates just how lopsided the incentives are in favor of being dishonest.

The game of the generals as I would like to call it is no different in fact from the practices of chief executives at any S&P500 corporation. Consider the manner by which AFP budget officer Lt Col George Rabusa recounted them: (1) upon assuming office, the chief of staff received a 10 million peso pasalubong or signing bonus, (2) while in office, each chief was given 5 million pesos in addition to his salary, an expense account in other words, and (3) upon retiring, a general was sent away with a 50 million peso pabaon or golden parachute.

Their method for appropriating such wealth to themselves? Creative accounting: just as chief executives cook the books in the short-term to claim bonuses and move on to a new company before auditors are able to decipher what they have done, these generals seem to have done the same using PCDA (or provision for command-directed activities) as the vehicle.

Just as in the corporate world, the only way to prevent such practices from spiraling out of control and protecting the interests of shareholders when the CEO controls the board and is in cahoots with the auditing firm is through whistle blowers from inside the company (women have been found to be more conscientious and less prone to corruption and are more likely to blow the whistle on the practices of the “bad boys” in the board room, which is the argument for appointing more women in senior positions).

To those who supported Gibo Teodoro in the last presidential derby, it must be exceedingly clear at this point why the revelations in the Senate would have never happened under his administration. In a democracy, it is always healthy for a turnover of the reins to occur from one party to the next. And so it is in our situation.

The question now is, what is likely to happen over the next five and a half years under P-Noy? Many have questioned his ability to run the government competently despite his probity. But as we have just witnessed, competence can be outsourced but not probity. P-Noy needs a few good men and women, especially women, in championing the cause of good government. Without them, he could  just be running in circles, manipulated by the masters of the game.

Erratum: the original version of this article referred to Lt Antonio Trillanes as being the 3rd instead of the 4th as it now appears in the article.