Public Sector Enterprises: government asked to finalise, enforce corporate governance regulations

The government has been asked to finalise and enforce corporate governance regulations for Public Sector Enterprises (PSEs) formulated by the Securities Exchange Commission of Pakistan to improve the performance of loss making organisations.
The SECP formulated draft regulations for the PSEs with a view to improve the efficiency of enterprises owned by the government and reduce hemorrhage to the budget. Syed Asad Ali Shah, who is currently heading the technical committee for development of corporate governance regulations for PSEs and related reforms, made a presentation on governance issue of the PSE and way forward here at a "Roundtable" organised by the Ministry of Finance in collaboration with Pakistan Institute of Corporate Governance (PICG) and Center for International Private Enterprises (CIPE) on Thursday.
He said that Asian Development Bank (ADB) report 2012 highlights public sector losses, as one of the major factors impeding growth with annual burden of Rs 300 to Rs 400 billion on the budget largely because of inappropriate governance, corruption, inefficiencies and inappropriate policy. He said that the key governance issues in public sector included inadequate quality of boards, lack of ownership & accountability, decision making extremely slow (lack of initiative), absence of reward and punishment system and lack of empowerment of the boards.
Asad Ali Shah said that the board lacks empowerment because CEOs invariably appointed by the government does not have the ability to take decision without getting approval from Islamabad. He said that due to lack of policies on conflict of interest, anti-corruption and ethical code, the corruption and nepotism in public sector enterprises is rampant.
He also briefed the roundtable about the key features of draft regulations on governance of PSEs by envisaging composition of board, their annual evaluation, as separation of chairman and CEO role and would ensure that directors act in the best interest of the company and not of their nominating organisations. As per proposed regulations, he said that the board would be responsible for the code of conduct. The law also provides the procedure for formation of board of committee, and procedure of appointment of Chief Financial Officer (CFO). It has been proposed to bring about reforms in PSEs, the government needs to rethink and decide its policy. The government would have to decide whether it is the business of the government to run the affairs or the job needed to be assigned to the private sector. He suggested that in the first phase corporate governance regulations (draft) for PSEs issued by SECP should be finalised and effectively enforced and in the second phase administrative & legal framework for nomination, appointment, empowerment, accountability and remuneration of directors of SOEs should be enforced.