Customers of ICBC - everyone who owns a car - should be angered by an audit that found mismanagement and unreasonable salaries and spending. But the anger should be directed at the government. Crown corporations don't operate in a vacuum. They report to ministers and, in our system, ministers are responsible to citizens for their performance, or lack of performance.
The evidence, based on the Insurance Corporation of B.C. audit, is that the government - and a succession of cabinet ministers - failed to fulfil their duties.
The audit was damning. It noted that between 2007 and 2011 the corporation cut front-line union employees by one per cent, but added 32 per cent more management positions. Management compensation costs increased by 50 per cent over five years, while non-management compensation costs increased by nine per cent.
Senior management costs - the CEO, vice-presidents and the board of directors - rose 70 per cent between 2007 and 2011. The soaring costs weren't justified, the audit found.
The increases came in part because managers had a "generous" bonus plan, with objectives so easily met that almost all staff got bonuses. Management pay and benefits were more generous than other branches of the public sector, as were ICBC pension plans.
And, fundamentally, ICBC managers were not focused on cutting costs. They opted for the more expensive options when selecting goods and services and failed to use a competitive bidding process in a large number of cases.
"A culture of cost-containment and financial discipline has been lacking in recent years," the audit found. Finance Minister Kevin Falcon said he was unhappy. ICBC is expected to cut 135 management positions over the next 22 months.
The corporation's CEO, Jon Schubert, is out of a job as of Nov. 15 (although he will continue to receive some $8,000 a week as a consultant until June). But ultimate responsibility for the poor management decisions don't rest with Schubert or the management team. The board of directors, appointed by the government, has legal responsibility for the corporation. No one has suggested they were misled by management. Directors are well-compensated - $15,000 a year ($30,000 for the chair) plus $250 an hour for meetings. Where is their responsibility?
And in our system of government, cabinet ministers are ultimately responsible. Falcon has been the minister responsible for ICBC since March 2011, so none of this should surprise him. In the past five years, responsibility has shuffled through seven cabinet ministers - Falcon, Shirley Bond, Rich Coleman, Kash Heed, Iain Black, John van Dongen (now a Conservative MLA) and John Les. That's chaotic, but doesn't excuse a government failure to protect the public interest.
The government also rejected another opportunity to avoid waste. There is a standing legislature committee to provide oversight of Crown corporations, composed of MLAs from both parties. But it requires government permission to meet, and that has been denied since 2008. (The aboriginal-affairs committee hasn't met since 2003; the education committee since 2006.)
Finally, there is another relevant issue. ICBC rates are much more affected by government decisions than by any of the problems identified in the audit.
The government plans to take $605 million from the corporation over the next three years as its share of profits. It also plans to take $1.2 billion from ICBC's capital reserves between 2010 and 2014 - money that drivers paid, and that could be generating interest to reduce insurance rates.
The government deserves some credit for identifying the problems. It deserves much more blame for allowing them to occur in the first place.
