The leak of information on the bonuses received by National Insurance Board (NIB) Director Algernon Cargill and other executives in a two-and-a half-year period added an interesting element to the ongoing NIB saga. By yesterday afternoon, the full breakdown of NIB executives' bonuses was making the rounds on the Internet. But there was one exception: The bonus column for NIB's legal officer Heather Maynard was blotted out. We're not sure why the bonus information of all executives -- including Cargill -- was made public, but Maynard's information left out.
According to the document, which was drawn up after the change in government earlier this year, eight NIB executives and NIB's actuary Derek Osborne collectively received bonuses of $723,333 between January 8, 2010 and May 1, 2012. Cargill received $194,791.66 in bonuses during that period, according to the information leaked. His annual base salary is $171,225.60. So far, much of the reporting on the NIB debacle has come out of the very detailed court documents filed by Cargill's legal team on November 28. Those documents resulted in a lot of bad press for NIB Chairman Gregory Moss, even in the absence of any hearing of the evidence or determination by the court.
With bonus information now made public, discussions will likely center around whether those bonuses were excessive, who calculated and authorized the bonuses and whether the executives who collected the bonus checks were deserving of the amounts they pocketed. Of course the more important issue at hand is whether Cargill in his capacity as director and CEO of NIB is guilty of any of the wrongdoing that Moss and the Board have accused him of. The other critical determination that must also be made is whether Moss is guilty of any of the allegations outlined by Cargill in his affidavit.
Cargill is suing for wrongful and unfair dismissal, defamation and breach of the Data Protection Act. Prime Minister Perry Christie seems hopeful that the results of an ongoing forensic audit of NIB will help settle this matter that has become a distraction early in his term. After meeting with Moss last week, Christie indicated that he was satisfied that there was no need to take any action in the absence of the audit. What many people are concerned about is whether there is evidence of corruption or abuse at NIB. With the information on bonuses now out, we will have to wait to see whether it will change the tone of the NIB debate.
Compensation Without reaching any conclusions, we figured it would be best to view this bonus issue in some context. Former NIB Chairman Patrick Ward told us that prior to his appointment in 2007, bonuses for executive management at NIB were simply a reflection of the percentage allocations that the executives were able to negotiate with the management union at NIB. So in effect, whatever was contained in the management union contract as it relates to bonus payments for the end of the year, the executive managers effectively used that for their own bonus calculations.
"And there was very little, if any reference to specific performance, very little if any reference to objectives and the extent to which that performance represented an achievement or attainment of those objectives," Ward explained. "And there was certainly no link to the overall direction in which NIB was headed, as it relates to financial performance benchmarks, customer satisfaction or even employee satisfaction. I did not think that this was appropriate." So changes were made and involved a number of things, Ward said. "One of the things that we did was to take a look through a study of similar organizations that are, to the extent that we can say this, compatible with NIB within the Bahamian marketplace," he said.
The study was undertaken by the Hay Group, a global management consulting firm. "That study determined or unearthed to my surprise that the overall compensation package for certain senior level executives in NIB was actually below the level that was currently in place for a number of compatible positions within a number of organizations in The Bahamas," Ward said. "It was my view that rather than approach the correction or try to bridge the gap by increasing salaries, that it would be better to have a situation or a scenario in place where management had the ability to augment their existing salaries through a system of bonuses.
"In effect, what we wanted to do is change the culture as it relates to both the expectations around bonuses and how those bonuses will be paid. "So, for example, management was given specific targets as it relates to the financial performance of NIB that were related to the collections of contributions, cost containment, from an administrative cost standpoint. They were also given benchmarks as it relates to other operational aspects." The bonuses were also tied to customer satisfaction surveys, as well as internal staff surveys that would indicate the extent to which employees were satisfied with the overall direction that management was taking NIB, Ward said.
"We created an environment where there would not be automatic payments for bonuses, but they would be specifically and objectively linked to the performance metrics that were put in place," he said. "There was a scoring method that was used both in terms of the level of responsibility, whether or not the objectives were met, and the extent to which the individual executive had an influence over the overall organizational goals and objectives, and so someone that had the ability to influence in a significant way all of those factors would have a higher score as opposed to someone that was in a very defined narrow scope in terms of their ability to influence all of that.
"And so, the differences were really linked to points that were a bit of a hybrid of the Hay methodology and some other components that were introduced over time." According to Ward, the Executive Human Resources and Compensation Review Committee dealt with the bonus issue. "When this committee was set up, it had a specific charter and one of the delegated functions within that charter was to review senior management related compensation performance appraisal reviews and issues related to that," he explained. "It was fair to the extent that there was a clear set of objectives and goals and Board oversight. So they (Cargill and Human Resources Vice President Richenda King) did not award this.
In fact, I specifically, had to sign off on the allocation payments, which the auditors would have insisted on seeing in any event. "I think one of the things you have to look at is if you look at his (Cargill's) base salary in any one year, and the bonus paid in any one year and you compare that to what we were benchmarking in the marketplace at other corporations of a similar size and scope etc., I don't think that you would find that there was a significant difference to the extent that he would be a lot higher than his peers in the marketplace. That's really the benchmark, in my opinion.
"So what we were doing was trying to find a way to bring compensation levels up to market value, so to speak." Ward said there is justification for Cargill being the highest paid executive within the quasi-government sphere "because NIB is the biggest company in terms of the value of the fund, the complexity of the job, the number of specific things that he gets involved in and the kinds of changes that were successfully implemented as well". Report According to NIB's Annual Report 2011, total net contributions income rose 13.7 percent over 2012, from $167.5 million to $190.5 million.
Investment income declined 9.1 percent, from $91.5 million to $83.2 million. Total comprehensive income was down slightly from $42.7 million to $42.6 million. Year-end reserves were up from $1.61 billon to $1.65 billion. "If you want a road map to the improvements, all you need to do is look at the end of the year 2010 financials and then look at the progression between then and what will be now the 2011 financials," Ward said.
"From 2009, which is the first year [Cargill] owned, through to 2011 or 2012 actually, it's clear, collections were up, administrative costs were contained within budget parameters; we expanded the reach of NIB through the introduction of the National Prescription Drug Program; we stabilized the IT environment because a lot of people don't know this. "The NIB IT infrastructure was on the verge of collapse.
If something had happened to one or two key individuals we would have had absolutely very little if any opportunity to recover the system... within an acceptable amount of time." Ward suggested the most important achievement under Cargill is that the culture of NIB in the mindset of the average employer is now completely different. "They now take it seriously," the former chairman said. "It boggles my mind how someone can look at his track record, what he has done, he's not completely responsible himself, and look at that and try to disturb that.
I think they should be cheering for him rather than trying to create difficulties. "I don't think NIB has had a period of time in consecutive years where the real important performance indicators have improved year over year consistently to the extent they have under his tenure." But while the former chairman has scored Cargill highly, the new chairman, Gregory Moss, and the board of NIB have not been impressed. Their decision to fire Cargill and the accompanying reasons are what have fueled the current firestorm and led to Cargill's lawsuit.
On November 8, Moss wrote Minister of Labour and National Insurance Shane Gibson advising that at a meeting of the board of directors on October 16, the Board "resolved to summarily terminate the services of Director Algernon Cargill and [IT manager] Raymond Wells effective immediately for gross misconduct..." Yesterday, NIB's board members, in the absence of Moss, made it clear at a press conference that they stood with Moss in certain pronouncements he made and that his actions had the full backing of the board.
The bonus structure implemented under Ward's watch has since been dismantled under Minister Gibson. The forensic audit that is expected to shed some light on the various matters raised in the last couple weeks is expected before the end of the month.
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