Please read our previous post for a background to this post.
The truth behind Derrick Latibeaudiere's parting with the Bank of Jamaica (BOJ) became known on Tuesday, November 3, 2009, when Prime Minister (PM) Bruce Golding addressed Parliament:
He was actually fired.
(The Bank of Jamaica is Jamaica's central bank. Derrick Latibeaudiere was the BOJ's Governor).
The PM called the former BOJ Governor's employment contract (including his pay package of JMD $38 million per annum), as being unacceptable, unconscionable and repugnant.
I say employment, in quotes, as Mr. Latibeaudiere was one of the "fortunate" few to be contracted to the BOJ, whilst being permanently employed by the BOJ. (He was the first BOJ Governor to be appointed from among the ranks of BOJ employee and did not resign as an employee, when his contract as Governor began over 13 years ago).
Let's examine the payment package for Mr. Latibeaudiere and why the Prime Minister made this statement:
Derrick Latibeaudiere's payment package was Jamaican dollar (JMD) $38 million (US $432,309): whilst the Chairman of the Federal Reserve Bank of the USA (the USA's Central Bank)'s salary is a mere US $191,300 (JMD $17,073,525).
(The USA alternates with the European Union as one of the top two largest economies in the world. Jamaica ranks as number 103).
This JMD $38 million pay-package consisted of:
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$24 million in housing benefits
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A basic salary of JMD $14,545,000
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Fully maintained car
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Reimbursement for entertainment expenses
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Group medical and life insurance
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All benefits under the BOJ's pension scheme, in addition to all benefits of being an employee, as well as contracted employee of the bank
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Housing -fully furnished and fully maintained inclusive of fully paid personnel (e.g. maids, gardener)
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Paid-for light, water
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His own house which was valued every two (2) years
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Full cost of maintaining residence - limitless
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Rent - limitless
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The interesting thing about the former Governor's housing arrangement, is that the Governor's official residence was bought in 1998 for $22 million.
At that time, the BOJ Board had reserved $35 million for the acquisition and refurbishing of a suitable residence of the Governor. Some six (6) months later, however, Governor Latibeaudiere suggested that the house be sold.
(The Governor reiterated that he was not keen to occupy house due to the likely cost for refurbishing.This is after the BOJ had made a total expenditure of $40,370,000 on the property).
The agreed property was then to be offered for sale to the Governor at $42 million, but he declined the offer. The decision was then made by the BOJ to dispose of the house on the open market. Thus in 2003, the house was sold for $40.28 million.
In September 2008, the Governor built a new home. [He had borrowed over $55 million at 5% interest to build the house.
Ironically the Governor's contract had a loophole that allowed him to avoid his own high interest rate policy (over 18% interest on loans) and borrow the $55 million at the low interest rate of 5%.]
This new home's rental was assessed at $2,551,000 per annum. Rental and maintenance added up to $8,451,500 per annum. As of September 2009, the maintenance and rent on this home was $23,818,360.
So the Governor's payment package was $38,363,360 in addition to entertainment expenses, pension and life insurance and all other benefits as an employee of the BOJ.
Upon the resignation of a Dr. Pine from the BOJ Board (as a result of his disagreement with the Governor's request for more money for the maintenance and rental of his own home), the BOJ Board submitted the Governor's contract to the Minister of Finance, for review.
It was the present Finance Minister, Audley Shaw, who found the current payment arrangements for the Governor unconscionable...
(The Governor, on October 29, stated that if his contract was not enforced, then the law should take its full course...meaning he would sue the government.
In light of the current worldwide economic crises and Jamaica's economic condition, the Government of Jamaica stated that it could not continue with Governor Latibeaudiere's contract, as a matter of principle.
They cited the example of the Governor of the UK's central bank who refused emoluments - stating the inappropriatedness in the current crises.
Hence they terminated Mr. Latibeaudiere's contract).
However Mr. Latibeaudiere is entitled to settlement for the 10 months left on his contract as well as redundancy payments as an employee of the BOJ.
(This is inclusive of years of service and the number of years that he was contracted for...a total which is reportedly approximately $100 million).
Hmmh!
Now Finance Minister at the time (1996), Omar Davies, signed off to the Governor's contract and reportedly never brought it before Parliament, even though there were glaring signs of excess.
What is also noteworthy, is that current Finance Minister, Audley Shaw, in 2007, also signed off on this contract when the JLP became government in September 2007.
Although the present government has tried to shift blame to the former government (in particular the former Finance Minister), both themselves, the former government and the Contractor General (the persons responsible for monitoring government contracts) and hence the keepers of the government's coffers, were caught napping.
E.g. why is it that alarm-bells did not go off in Audley Shaw's head when he was required to sign-off to the renewed BOJ Governor's contract in October 2007?
....Hmmm?
This situation also brings another to the forefront:
Due to the lack of a clear policy regarding positions held by people who are political appointees, persons loyal to a former administration usually remain in these posts, until forcedly asked to resign by the new administration.
It should be mandatory that all these people resign, when a new government is sworn in, as is customary in the USA.
This would avoid the embarrassment caused when these people are forcedly asked to vacate their posts.
It would also avoid the situation of the new administration having to remunerate persons who were being overpaid, as a change of government would indicate an end of contract, which would be written in the contract and enforced by the new administration.
Which brings me to the issue of performance-based pay. I believe that if Mr. Latibeaudiere's tenure at the BOJ (and hence his policies), led to Jamaica having a large fiscal surplus versus a large fiscal deficit, then I 'd say, pay him what he's worth.
But because most Jamaicans are unclear about what a governor of a central bank's role is, many have no clue as to how these persons should be paid.
According to Wikipedia, the functions of a central bank are as follows:
Its primary function is to provide the nation's money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.
The governor/chairman of any central bank thus ensures that the bank is in a position to successfully enact the above functions.
[Mr. Latibeaudiere was BOJ Governor during the FINSAC debacle (1997-1998) when many businesses and banks became extinct - due to the high-interest rate policies (up to 100+ percent) of the day].
Moving Forward
What the Ministry of Finance, now has to do, is:
1) Revise the organizational structure of the BOJ and the function (and hence the job description) of the new Governor, to ensure Jamaica's economic sustainability, without the borrowing of money.
[Jamaica is too rich for us not be using our resources (human and otherwise) to dig ourselves out of the borrowing hole we've gotten into].
2) Revise the job descriptions and contracts of all members of the BOJ Board (including the governor) and its administration - so that they are in line with the governor's new mandate.
3) Revise the contracts of all persons contracted to government, in all positions (not just persons earning in excess of $10 million) - to ensure that their renumeration is reflective of the quality of their performance during their tenure (performance-based pay) - E.g. they should get a minimal basic salary and should be commissioned only if certain performance criteria are met...
...This includes government ministers.
The only question is: who will do the reviewing?
Do we still have men and women of integrity at the BOJ, under government employ, or in the private sector, who can give a balanced and fair opinion and input re these contracts?
If so, then these people need to be identified and their input sought to do the necessary restructuring.
They should also be held accountable if the measures they put in place, have loopholes and should be open to being sued and being fired, due to negligence, if this is the case.
It is time that Jamaicans and all those who govern us, or who are in charge of our affairs, be held accountable for how they manage this country...or else we will continue to be in a debt spiral... for economic prosperity cannot occur in an environment of corruption and mismanagement.
Derrick Latibeaudiere's dismissal points to the fact that we need more knowledgeable and trained people who have Jamaica's interest at heart, managing our country.
What do you think?
Gillian
Sources Include
1) Article, "Latibeaudiere Paid More Than US Federal Reserve Boss", Jamaica Observer News, November 4, 2009
2) Evening Programme, "Cover Story" - Nationwide Radio, November 3,2009
3) Central bank functions, via Wikipedia.org
4) List of world economies via Wikipedia.org
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