Corporate governance for public corporations

>> Tuesday, January 3, 2017

Ike Señeres

As it is generally understood, National Government Agencies (NGAs) are not corporations in the same sense that Government Owned and Controlled Corporations (GOCCs) are. Following that legal fiction, it is also generally understood that corporate governance as a body of knowledge is not applicable to NGAs in the same sense that it is applicable to GOCCs.
It is a different story in the case of the Local Government Units (LGUs) however, because under the Local Government Code (LGC), all LGUs could practically function as corporations, and because of that legal fiction, it goes without saying that corporate governance is applicable to them. Although it might sound like an exaggeration, it is actually true that under the LGC, all barangay councils could actually function like corporations, and therefore, corporate governance is also applicable to them.
 In theory, it could be said that NGAs are also purveyors of products and services, in the same sense that private corporations are. Although the functions of NGAs are supposed to be limited to making policies and implementing these policies in the form of plans, programs and projects, it could also be said that these programs and projects would also take the form of products and services, when seen in a broader sense.
Be that as it may, it could be said that the main difference between an NGA and a private corporation is that the former does not exist for the purpose of making profits, while the latter does. That may however not be an exact comparison, because there is also such a thing as a non-profit corporation. Having said all that, it does not really matter what are the apparent differences between the two, because the bottom line really is whether they are efficiently run or not.
 No one seems to be talking much about it yet, but I believe that NGAs could actually keep their legal personalities intact as they are now, but at the same time, they could actually form new GOCCs that could become the implementing arms of their revenue generating programs and projects, thereafter presented as products and services. This approach is not actually new, because the then Ministry of Human Settlements (MHS) actually did this, when it created and operated the then Human Settlements Development Corporation (HSDC). Moreover, the HSDC created the Bliss Marketing Corporation (BLISSMARK) as a subsidiary, where I first entered the government service as an Assistant Vice President and Group Product Manager. Perhaps this was also the approach used by the Department of Trade & Industry (DTI) when it created the Philippine International Trading Corporation (PITC). Similarly, the PITC also created a subsidiary that is now known as PITC Pharma Inc.
 Looking at an extreme scenario, it is even possible that only the Secretaries, Undersecretaries and Assistant Secretaries could remain at the line Department side, being the bureaucratic side, while the rest of the line officers and employers could move over to the corporation side.
For purposes of formality and practicality however, the Secretaries should also be appointed as the Chairman of the Board, while known experts in the field covered by the specific Departments could be appointed as members of the Board. For purposes of check and balance, the Undersecretaries and Assistant Secretaries should not be appointed to the Board. Lest I be misunderstood, I would like to make it clear that my idea would only apply to the revenue generating functions of the government.
 In the overall, it could be said that line agencies would only have two main functions, and these are the policy making and the service delivery functions. To some extent, it could also be said that most of the service delivery functions could also become revenue generating functions. Do not get me wrong, because it does not necessarily mean that revenue generating public corporations should also be profit making.
Just like the non-profit corporations, the public corporations could generate revenues, but they need not declare profits, nor would they be required to make profits. Actually, the goal of these public corporations is not to make money, but to make service delivery more efficient. The added advantage is that the government need not appropriate funds for them anymore, after the initial investment is released.

 As it is now, the Congress has to appropriate funds for all line Departments every year, a burden that is really very heavy for the government. As it happens, the revenues earned by these Departments are remitted to the National Treasury, to be again appropriated by Congress the year after. This is really a very complex and a very expensive circuitous process that is surely not very efficient. If and when the public corporations are separated from the line Departments, the former could just keep their revenues to be able to fund their operations. As I earlier said, they need not declare profits and instead, these extra funds could be flowed back into their operating budgets. In the event that they would really have surplus revenues beyond their operating needs, they could also donate these to the National Treasury. For feedback email or text +639956441780


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