Scroll down for the text of my article this month in the Money Magazine. A link to the magazine is here.
George Spiteri is a lucky guy. He was given €150,000 to retire from his position of HR Manager of the Malta Financial Services Authority which used to include the company registry. The same restructuring that saw him off also gave its old department – the company registry – the status of a separate agency. That new agency recruited George Spiteri as its HR manager.
Effectively therefore George Spiteri was given in a day what many people earn in 10 years as a bonus for staying in the same job but with far less responsibilities. It’s not a million miles from winning a lottery. But without having to buy a ticket.
By trade, George Spiteri is a garden variety senior HR executive. Sure, he has experience, maturity and responsibility. He has many years of service under his belt enforcing public sector rules that can be arcane and esoteric and are often the purview of a limited few.
Indeed, HR managers in the public sector are a sort of priesthood. It takes years to learn all the rules and – a bit like the painting of the Golden Gate bridge – when you think you’ve learnt all the rules you need to start catching up with all the changes.
One reason for that is that though entities within the public sector are in theory autonomous and can take their own decisions they fall within the system of government which they can’t ignore.
Take an HR manager at the Transport Authority for example. The unions will want to negotiate the best deal for their employees. The HR manager is not paying the employees out of their own pocket so instead of a tough negotiation with an angry union, they may be tempted to give employees a huge pay rise and let’s pour a pint at the pub. After all the Transport Authority collects millions from car registrations and licences so it can easily spare a little bit extra for the pockets of its employees.
But then the union will go to another public sector authority and ask for a pay rise. ‘Why do workers at Transport Malta make so much and teachers in schools make so little?’ The HR manager at the Education Department though, cannot afford to be as generous as their Transport colleague. The Education Department spends money but collects none.
The government avoids these problems by overriding the autonomy of its various agencies and imposing common standards of negotiation for collective bargaining. It pegs most salaries across the public sector matching relative rank with income. It really only allows differences in the deals different authorities or agencies close when the specific needs of the sector in which they work justifies it. Otherwise it’s all one kitty.
After all some agencies are cost centres, some others are revenue centres. But the buck stops at the Finance Ministry and there’s only one of those.
The George Spiteri incident does not fit into this logical framework. George Spiteri was HR manager at the Malta Financial Services Authority. The MFSA is, in theory, a revenue centre for the government. To be sure it provides a public service. But the service it provides is intended for profitable businesses: banks, financial institutions, that sort of thing.
The Authority writes the rules for the behaviour of these businesses and makes sure these businesses comply with them. And since no business can function without rules that regulate its competitors they pay the authority to ensure its continued existence.
The MFSA is not a ‘social service’. Compare it with the Housing Authority say. The job of that body is to provide a roof over the heads of people who cannot pay for any themselves. The clients of that authority exist because they can’t afford to pay and the state is obliged to ensure nobody’s homeless even those who cannot afford a home.
Poor people don’t own banks. A bank that cannot afford to exist should fold and not continue to exist.
Breathtakingly though the MFSA lost money over the last few years and the government had to pay for the shortfall.
The George Spiteri episode therefore cannot be seen in isolation from this background. Not only would it not be right for the MFSA to be excessively generous because it is a revenue centre. The time when this happened was a time when this revenue centre was flowing money the wrong way sucking up millions from the government rather than pumping them towards it.
The 2018 annual report of the MFSA notes that the authority has lost the income that used to be generated by the company registry when that belonged to it. The registry pumped €14 million into the authority in 2017 down to €5 million in 2018. There will be no income from the now separate registry this year.
Professional fees at the Authority have shot up from €748,000 in 2017 to a whopping €5.2 million.
And thanks to the handiwork of Mr Spiteri himself employee benefits have gone up by €1.7 million on top of the €10.8 million spent in 2017. That’s salaries and social security for a staff complement that has gone up from 304 employees to 326: an increase of 15 managers.
It is right that the MFSA builds capacity. It needs to. Malta’s reputation as a financial services centre has not been quite so terrible since 1988. Under its nose Pilatus Bank was set up, funded from proceeds of crime. Also, under its nose Satabank was set up operating what we’re hearing was a money-laundering machine, though we can’t be sure as no one has been charged of anything yet.
Although the HR Manager of a regulatory body cannot alone be held responsible for their employer’s failings, it is clear that the capacity building he was responsible for did not yield glowing results.
George Spiteri had no place in the reformed Authority. Its new management wanted to shake-up the way things were done so the MFSA would stop bumbling its way from one disaster to the next. The retirement schemes, of George Spiteri’s own design presumably, were meant to get rid of the dead wood. And he was sent adrift.
Only to be fished out again by the new registry agency before he even got properly wet. He now supervises the same staff he used to work with at the MFSA. They did not get a bonus when they were transferred from Imrieħel (the MFSA offices) to Żejtun (the new Registry offices). They were just given a letter saying they will now be reporting to a different agency on the same terms as before.
But George Spiteri’s letter had attached a whopping €150,000 for what effectively amounted to the same thing.
This is wrong on so many levels. It is misuse of public funds, obviously. Except from George Spiteri’s point of view, the money is well and truly wasted.
But it raises suspicion of worse: collusion, to begin with. Someone agreed to do this even expecting the inevitable criticism they would have to face. I accept that having knowledge of public sector HR practices is not a widespread skill, but it is not exactly unobtainable either. The market provides more experienced HR managers than brain surgeons or nuclear physicists and it pays neither of those €150,000 for no discernible reason.
What I’m saying is this. Whoever was setting up the registry agency may have thought that George Spiteri’s experience would avoid the cost of a learning curve at the HR department. But given he had been paid €150,000 of the public’s money to leave the MFSA the conscientious thing to do for the new Registry management would be to forego the benefit of George Spiteri’s experience and hire someone else.
The decision not to give a flying duck about the expense, or, as is more likely, the decision to pay him a fat bonus for no reason whatsoever, is corrupt.
But no one is paying for the consequences of that corruption. Except you of course.