Economy, Business And Markets

Parliamentary Report Calls for Salary Regime Overhaul

Business & Markets Desk
The parliament released its findings about the salary scandal that cost a group of high-ranking executives their jobs this year and proposed a 10-point solution for preventing its repeat
Parliament Speaker Ali Larijani
Parliament Speaker Ali Larijani
The commission’s report was devoid of any information or statistics about the extent of the scandal or the salaries that had been taken at the taxpayers’ expense

All state institutions must use the same salary system to prevent misuse of public money. The parliament’s Article 90 Commission put forth a 10-point proposal for organizing executive pay in the government in Tuesday’s parliamentary meeting.

The report called for an overhaul of government’s salary system. If the proposal is passed into law, all state organizations, including the parliament, government, judiciary, armed forces and foundations, will have to scrap their pay schemes and use a single system for calculating salaries and benefits.

The commission, which investigates complaints about the conduct of the parliament, government and the judiciary, offered its proposal after reporting its findings on the executive pay scandal that started in March.

Paychecks of top executives of some government companies leaked into social media showing them taking out lavish salaries and benefits along with low-interest loans from the taxpayers’ pockets.

 Executives Get Sacked

Following the leaks, Economy Minister Ali Tayyebnia sacked the head of Central Insurance of Iran, Mohammad Ebrahim Amin, and the entire board of governors of the National Development Fund of Iran, including its head Safdar Hosseini. However, they took recourse to courtesy resignation.

The public executives were taking out pay 50 to 60 times the average pay along with negative real rate interest loans—meaning the interest on their loans was far lower than inflation and bank deposit rates, making them very cheap to service—using legal loopholes. Both President Hassan Rouhani and Parliament Speaker Ali Larijani ordered investigations into the matter.

 The Speaker Gets Involved

The commission’s report, read out by its chairman, Bahram Parsanejad, avoided dwelling on what had happened. It was devoid of any statistics about the extent of the scandal or the salaries that were being taken.

The commission split its findings into two categories: the shortcomings of the law regarding the scandal and criminal activities to circumvent laws. The commission wants salary regimes overhauled to close the legal loopholes that made the scandal possible.

The commission faced difficulties gaining access to paychecks of military and intelligence organizations, according to the commission’s vice chairman, Farhad Tajari. The organizations declined to disclose the required information to the parliament citing security concerns. The situation was diffused with the direct involvement of Larijani who secured the release of the data to the Supreme Audit Court.

 The Proposal

The parliamentary report’s first article asks that the “Public Service Law”, ratified in 2007, apply to all state institutions from now on.

The MPs suggest pay caps for top elected officials, ministers and high-ranking executives of banks, insurers and government corporate executives in the next two articles.

The fourth and fifth articles ban receiving payments from multiple sources and multiple pension funds. Government managers are notorious for propping up their pay or retirement pension like this.

For example, a general in the armed forces, which has its own pension fund, can pull some strings and move the National Iranian Oil Company, which has a different payment scheme, for a few years before moving to another state organization. Come retirement, our former general could collect two or three pensions.

There was also a precedent for government managers to take multiple board positions, which entitled them to annual bonuses for each position. This was banned a few years ago.

Article 7 gives the Economy Ministry four months to implement a single payment system with clear data about their gross pay, which can be easily monitored.

The committee sets a penalty of six-month to one-year suspension of service or a fine of two to four times the amount taken illegally for both the manager and the organization’s financial officer.

All officials that fall under the scheme must also disclose their full salary record for as far back as 2009 to the Supreme Audit Court and the General Inspectorate Office upon request. Also, all auditors and accountants that review such accounts will be mandated to disclose any irregularities.

 Unlikely Protest

The execution of this law may close the legal loopholes that allowed state executives to prop up their pay. It will bring more transparency and control over executive pay. However, some organizations like the National Iranian Oil Company may not like the change.

The NIOC has had a separate salary, pension and healthcare scheme since its creation in 1948. Oil industry workers pay more for their pension, retire later and receive a better pension. They would be entitled to protest that the commission’s proposal would be an infringement on their rights. The ministry has successfully defended this position in the past.

The most recent attempt was warding off ex-president, Mahmoud Ahmadinejad, who wanted to merge the company’s richer pension fund with other state funds to alleviate their financial troubles. Banks and insurers may also think in the same way.

Though outrage over the scandal is so much that government agencies will, in all likelihood, shy away from fighting it. It is a different story with other state actors, however.


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