Multiple Corporate Objectives and Performance Contracts: The case of Philippine Government Financial Institutions
Al-Habbyel Yusoph (University of the Philippines)
This paper explores how Philippine government financial institutions (GFIs) balance their multiple and conflicting objectives by examining their performance contracts with the government. GFIs and other state-owned enterprises (SOEs) are often mandated to pursue other goals aside from profit maximization. In 2011, the government institutionalized reforms in the corporate governance of its SOEs and, in 2014, implemented performance contract agreements which required GFIs to develop balanced scorecards following Kaplan and Norton (1992). Using various corporate governance and goal-setting theories, this paper reviews the performance contracting process and twenty-three (23) actual balanced scorecards. The review finds that GFIs have different priorities, with social and financial goals having the highest weights. With the use of balanced scorecards, GFIs were able to solve their multiple objective problems by specifying the tradeoffs and developing a single annual objective score. First-year results of the performance contracts indicate that GFIs might be gaming the goal-setting process and exhibiting “ratchet effects”. Finally, this paper recommends that (1) the government review GFI objectives, especially with regard to the primacy of financial goals over non-financial goals, and that (2) control and quality measures be added to ensure that performance contracts are effective.
Are local governments in East Asia becoming “too big” or “too small” to deliver services?: The cases of Indonesia, Japan and the Philippines
Michael Tumanut (University of the Philippines)
Local governments are social and political constructs. They configure power structures, control taxes and determine type of services within their local jurisdictions. This paper will examine the evolving size of local governments in East Asia, particularly focusing on local governments of Indonesia, Japan and the Philippines, and its cursory effects on service delivery, some of which are the metrics used in sustainable development goals. Although local government size is usually measured in terms of population and land area, in this study, the changing size of local government (e.g., becoming too big or too small) is determined by the volatility of its borders. Subnational territorial fragmentation is hypothesized to be triggered by ballooning population, while territorial consolidation or merger by a declining population. The literature on the pervasiveness and impact of territorial redrawing in East Asia is limited. Territorial redrawing in many countries is a collective action issue. Such an action may also be construed as innovative or responsive to changing times. From an institutional perspective, the varying size or porous borders of local governments is not solely triggered by population, but instead is a proximate function of the number of veto players (VPs), cohesion, and congruence of preferences of the key players. Using cases of subnational territorial reform (i.e., merger and fragmentation) in the Philippines, Japan and Indonesia, incidence of territorial reform and rate of reform are both illustrative of the influence of the number of VPs on the volatility of borders. There are also differences on volatility patterns or outcomes within each country, due to varying reform rules spatially or temporally.