Resignation of CEO of NPRA

NATIONAL

PENSIONS REGULATORY AUTHORITY

Our Ref. No. NPRA/GC/13/12

Date: 20TH January, 2012

H.E

JOHN EVANS ATTA MILLS

PRESIDENT

OF THE REPUBLIC OF GHANA

OFFICE

OF THE PRESIDENT

THE

CASTLE – OSU

Your

Excellency,

RESIGNATION

AS ACTING CHIEF EXECUTIVE OFFICER OF NATIONAL PENSIONS REGULATORY AUTHORITY

I

make reference to a memo from the Board Chairman of National Pensions

Regulatory Authority (which I have attached for ease of reference) titled

‘Comments on conduct of Board by Acting CEO’ dated 15th February,

2012 and received on 17th February, 2012.

It

is common knowledge among Board members that the working relationship between

the Chairman and the Acting Chief Executive Officer has not been cordial and to

the extent that the Board has set up a mediating team to identify the root

cause of the problem and make recommendations to rectify the problem.

From

my position as the Acting Chief Executive Officer, the non-cordial working

relationship is not a personal issue but rather conflicts that are coming out

from corporate governance challenges and differences in the management style of

running the business of the Authority. The memo from the Chairman is purely an

attempt to play the Acting Chief Executive against the Board and Government.

The Board is fully aware of my concerns and frustrations in running the

Authority and these I have raised in one form or the other to Board members.

I

have admitted to the Board previously that I have consulted some eminent people

to discuss my frustrations at the administration of the Authority. I did this

with the best of intentions to get help and highlight the importance of the

Authority

in the national economy. I am pleased to mention that it is one of such

consultations that resulted in the Acting Chief Executive Officer being invited

by the President’s Economic Advisory Council to make a presentation.

The

invitation was honoured by the Board Chairman in the company of the Chief

Executive Officer and one Board Member (Dr T.A. Bediako). We all came out of

the meeting with the feeling that we had a fruitful deliberation at a very high

level and we were anxious to receive a follow-up invitation. If not for

anything, this singular act of meeting the President’s Economic Advisory

Council clearly demonstrates my conviction that government can facilitate the work

of the Authority and dispels the rumour attributed to me that government is not

committed / interested in the Pensions Reforms.

I

have no desire of responding to the issues raised in the Board Chairman’s memo

but for the sake of the records, I wish to use this opportunity to speak to the

issues that I consider in my professional opinion to be the challenges

confronting the Authority and impacting negatively on its day to day

administration. For the sake of emphasis,

I wish to state that the comments and issues discussed below are not personal

but examined purely from a professional perspective.

1. Having

the philosophy of doing first things first.It is people

who get work done and not laws and guidelines. It is for this reason that

recruitment and training of staff should have been the priority of the

Authority. To recruit staff means to put remuneration packages in place and

have it handy for discussion with applicants.

The

Authority interviewed a wide range of applicants some dating back about a year ago,

yet appointments could not be made because compensation packages were not in

place. In my early days in office, the Acting Deputy Chief Executive Officer

and I committed ourselves to developing a compensation package but for some

reason we cannot understand, we did not obtain early support from the Board.

The Chairman subsequently put together a Board Sub-Committee on remuneration

which strangely excluded the Acting Chief Executive Officer and his Deputy from

the Committee’s deliberations. The salary structure is currently with the

Ministry of Finance and Economic Planning awaiting formal approval.

The

training needs of a new organisation like NPRA is enormous and even though

belated, it is desirable that staff be recruited early and passed through training

for the task ahead.

2. Challenges

of Corporate Governance.The Board of the Authority

(non-executives) is a fully constituted one, but unfortunately, at the time of

its constitution, the Executive team was not put in place. It took a while to

introduce the Executives on piece meal basis. This situation created a

challenge for the Board whereby the Board assumed executive powers. With the

introduction of the Acting Chief Executive Officer and a Deputy, it is

desirable that the Board assumes its governance role and relinquish day to day

administrative powers to the Executives.

Micro

managing by the non executive Chairman is amplified in signing cheques and

demanding that all administrative correspondence be copied him. The Board

Chairman ever signed letters to override earlier ones written by the Acting

Chief Executive Officer and prevented the Acting Chief Executive Officer from

attending a World Bank sponsored training programme in Washington DC. The Board

Chairman

bypasses the Acting Chief Executive Officer and his Deputy to instruct and

obtain information from subordinates. This is even extended to third party

service providers who the Chairman engages with in the execution of their

contract.

The

straw that broke the camel’s back in this tumultuous relationship occurred on

10th February, 2012 when the Chairman called a meeting of management

staff, some Board members and third party Fund Administrators without the

knowledge of the Acting Chief Executive Officer. The Acting Chief Executive Officer

was only

informed by the Accountant who could not tell what the agenda of the meeting

was. This meeting was actually a platform used by the Chairman to humiliate the

management of the Authority in the presence of the third party service

providers.

Governance

is a huge challenge for the National Pensions Regulatory Authority and the

earlier the issue is addressed the better it would help the Authority to

deliver on its mandate.

In

my humble view, it is about time the government review governance issues of all

public Boards and provide clear guidelines to ensure that the conflicts and

deviations from good corporate governance practice I have witnessed is not

occurring in other institutions.

3. Accommodation

for the Authority. Although government has paid for a

rented accommodation for the Authority, the staff could not move in immediately

as the initial effort by the Acting Chief Executive Officer to commence the

procurement process for air conditioners and other fittings was thwarted by the

Board Chairman. The Chief Executive Officer’s application letter to the Public

Procurement Authority to obtain approval for restricted tendering was presented

to the Board by the Chairman as an attempt to award contract to suppliers

without Board’s involvement. The Board was of the conviction that they had a

significant role to play in the procurement process. A subsequent letter from

the Public Procurement Authority however confirmed the status of the Chief

Executive Officer as the Chairman of the Entity Tender Committee of the

Authority and this put the issue to rest. The Authority subsequently

recommenced the process and do hope that final approval would be obtained soon.

Currently the Board is demanding that the staff of the Authority should move

into the new premises which have glazed rooms without air conditioners.

4. Temporary

Pension Fund Administration.The Authority

assumed the role of Temporary (5%) Pension Fund Administrators when it has

limited capacity. In order to manage the transitional arrangement, SSNIT was

requested to collect and remit to the Authority payments from contributors

whilst third party service providers were engaged to handle data management.

Due to the configuration of SSNIT’s internal system as managers of Defined

Benefits it was quite obvious that SSNIT would have challenges in collecting

and remitting contributions timeously. Consequently it is becoming onerous to

keep accurate record on contributors’ principal and returns on investment and

ultimately produce statements that would reflect the time value for money.

An

attempt by management to draw attention to the challenge of record keeping in

the Temporary Pension Fund Administration and offer solution was challenged by

the Chairman of the Board. On 30th November, 2011 at a Board meeting

held at Dodowa, the third party service providers were invited to allay the

fears being raised by management on contributors’ statement. Assurances were

given by the service providers that all is well. Unfortunately, however, the

Board Chairman on 10th February, 2012 attacked the management of

NPRA in the presence of these same third party service providers for being the

cause of challenges being experienced in the

production of contributors’ statements.

It

is important that serious efforts are made to reconcile contributors data to

ensure that cash and investment holdings that are under the custody of NPRA in

aggregate is equal to the total

liability due to the contributors before statements are sent out to them. The

caution is that Defined Contribution is fully funded and at any point in time

the contributors’ statement and the funds should be the same.

5. Transitional

Issues with SSNIT.Although there are issues the

Authority has engaged SSNIT on, there are two that are worth mentioning in this

document. First is the past credit as stipulated in Section 94(1) (d) of Act

766 (Accrued or past service or past credit earned by every contributor to whom

the new scheme applies in respect of the 25% lump sum benefit shall have the

lump sum determined by a formula agreed between the Pension Reform

Implementation Committee and the Trust based on actuarial assessment). The

Authority has been at this for far too long and I think this issue is creating

so much anxiety in the system. It is important that an early determination is

made to put this matter to rest.

The

second has to do with the formula for the computation of pensions. It is common

knowledge that there are errors in Section 77 (2) & (3) of Act 766. The

errors are purely arithmetic and one would have expected that correction would

rather be straight forward. The Board’s posture particularly with Section 77(3)

when the Acting Chief Executive Officer made conscious effort to generate

discussions to change the mistake made in an earlier correction was rather

unfortunate. I do understand that there are two schools of thought in the

Boardroom – one being realising the benefits of the pensions reform immediately

and the second being allowing for gestation period before realising the

benefits of the scheme. It is my considered view that it is because people were

not very happy with the SSNIT scheme that is why the reform was introduced.

What

was not working well over a long period cannot be corrected by the stroke of

the pen. There is certainly some work to be done in SSNIT before improved

benefits can accrue. It is for this reason that we cannot

be too generous to the detriment of the

survival of the scheme when we do not correct this error.

6. Licensing

of Corporate Trustees. The Authority is gearing up to

license Corporate Trustees with the assumption that the Temporary Pensions

Funds under the care of the Authority would be transferred to license Corporate

Trustees. Although the Authority is under tremendous pressure to issue

licenses, it is my humble submission that the process be given some critical

thought. Additionally, the desire to license must be balanced with the

development of the appropriate regulatory capacity of the Authority.

7. Contingent

Liabilities of Transitional Provisions– Act 766, Section

213. ‘The following enactments and schemes shall on the commencement of this

Act apply for a transitional period of four years and cease to be in force

after that period.’

a. the Pensions Ordinance No. 42 of 1950

(CAP 30) as amended;

b. Teachers Pension Ordinance 1955 as

amended;

c. Ghana Universities Staff

Superannuation Scheme;

d. Ghana Police Pensions Act, 1985 (PNDCL

126);

e. Public Legal Officers Pensions

Amendment Act 1986 (PNDCL 165);

f. Immigration Service Pensions Act 1986

(PNDCL 226)

g. Prisons Services Pensions Act 1987

(PNDCL 168)

h. Section 34 of the Security and

Intelligence Agencies Act 1996 (Act 526) and

i. Section 27 of the National Fire

Service Act, 2000 (Act 537)

Section

219 (1) “Subject to section 213 of Act 766 the retirement benefits in respect

of accrued or past service earned by an employee shall be computed in

accordance with the terms of conditions of service existing before the

commencement of this Act 766”.

Section

219 (2) states that “Each employee shall be issued with a Ghana Government

Retirement Bond equivalent to the total retirement benefit that was due the

employee as computed at the commencement of Act 766”.

There

is no doubt that Sections 213, 219(1) & (2) impose an onerous task on the

Government. These sections pose real challenge to the national economy and one

would have wished that there was adequate platform to

discuss

with the appropriate government agencies for effective planning and management

of pension liabilities that are crystallising. The President’s Economic

Advisory Council was hinted about this contingent liability.

Your Excellency, there is no doubt in my mind that

the work of the Authority is herculean but with limited resources. There is the

need to make policy determination as to how to fund the activities of the Authority

at its initial stages. There are a number of options to be considered.

· Government funding all the activities

of the Authority

· A combination of Government funding

and limited generation of internal fund through levies

· Government giving seed money to set

the Authority up for the next two years and wean off completely

· The Authority immediately levying

schemes including SSNIT and Temporary Pension Funds aggressively

· Donor support

Whatever

the option chosen, it is important to give the Authority financial muscle to

get its work done efficiently.

Your

Excellency, having said all these, what is most important is the human beings

who work in the organisation and the leadership being offered through the Board

Chairman and the Chief Executive Officer. The deteriorating nature of the

relationship between the Board Chairman and the Acting Chief Executive Officer

is not healthy and poses a great challenge to the development of the Authority.

It is in this light that I have decided to resign my position as the Acting

Chief Executive Officer of the Authority with effect from 1st May,

2012. I will proceed on terminal leave from 16th March, 2012 to 30th April, 2012. I

intend to use the period from now to the time I proceed on leave

to wind down and handover to my Deputy and the Board Chairman.

Your

Excellency, unfortunate as my decision may be, I wish to thank you sincerely

for the opportunity offered me to serve for the past one year. I wish the

Authority, the Board and Staff well in the march to develop the pension industry

in Ghana.

Yours

faithfully,

DR DANIEL K. SEDDOH

ACTING CHIEF EXECUTIVE OFFICER

NATIONAL PENSIONS REGULATORY

AUTHORITY

Cc: H.E. the Vice President of Ghana

Chief of Staff

Secretary to the President

Deputy Chief of Staff – Dr Valarie

Sawyerr

Minister of Finance and Economic

Planning

Minister Responsible for Pensions

Board Chairman – NPRA

Board Members - NPRA