Conflict of financial powers: Parliamentary body's decisions sent to public-sector companies

Public Accounts Committee's Secretariat has sent the decisions of a parliamentary panel regarding the 'conflict of financial powers of Boards of Directors in different public sector companies with the powers of Ministry of Finance', to public sector companies for compliance. A sub-committee of Public Accounts Committee under the convenership of Syed Naveed Qamar was assigned the task to give recommendations on conflict in financial powers of Boards of Directors in different public sector companies with the powers of Ministry of Finance and submit its report.
In its report submitted to PAC Secretariat, the committee directed the audit department to look into the guidelines prepared by Ministry of Finance and discrepancies (if any) in it and conduct the future audit in light of these guidelines. The Public Sector Companies operate under the Companies Ordinance 1984, and the BoDs have the power and authority to take decisions without the requirement of taking approval from the Government, but stay within the guidelines provided in the "Public Sector Companies Corporate Governance Rules, 2013".
The Sub-Committee recommended that the Government-nominated members of Board of Directors of Public Sector Companies should keep in mind the interest of the government and the companies. For future decisions of Boards of Directors, complete and comprehensive guidelines "Public Sector Companies Corporate Governance Rules 2013" have been provided by the government which should be followed by Boards of Directors and therefore future audit should take place in light of these guidelines.
Within 3 months all directors of Public Sector Companies should sign off that they have read the Public Sector Companies Corporate Governance Rules 2013 and that they will comply with the guidelines provided. According to the Committee, the directives of the Ministry of Finance were not implemented properly. Different Public Sector Companies through their Boards of Directors increased salaries, allowances and approved bonuses without the approval of M/o Finance. Audit had also pointed out the misuse of powers by Boards of Directors and was of the view that Boards of Directors have no authority to take the decision on their own. On the other hand, the Public Sector companies emphasised that under the Companies Ordinance 1984, Directors were completely competent to take decisions and therefore, there was no need for prior approval of the Ministry of Finance. After discussion on these points, the Public Accounts Committee decided to constitute a Sub-Committee on the issue to decide the matter.
According to the report, the Secretary Ministry of Finance, Dr Waqar Masood Khan, informed a meeting of Sub Committee held in March 2015 that the basic motive to constitute Public Sector Companies under Companies Ordinance, 1984 was to liberalise the government and turning the departments into corporations. He further explained that when a company is formed by the government then that company is bound to work under the said Ordinance, and a Board of Directors run the affairs of the company under the provisions of this Act. He explained that in order to take government policies into account, an exception can be added to the Articles of Association that the Company will comply with the government policies and seek approval of the government as and when required. He said that PIA was also formed under an ordinance and its affairs were governed by a Board of Directors.
The report further added that the committee members asserted that there is a need for broad-based guidelines because most of the Directors from different companies were not taking care of the government interest. Secretary, Ministry of Finance added that the Ministry has prepared the guidelines and notified in the Gazette of Pakistan. The Lahore High Court has appreciated the efforts made by the Ministry in this regard.
The report maintained that Dr Khaqan Hassan Najeeb, D.G, Implementation and Economic Reforms Unit, Ministry of Finance stated that the Ministry of Finance had discussed the issue for more than two years to inject clarity into guidelines and notified the same as "Public Sector Companies (Corporate Governance) Rules, 2013," prepared in consultation with SECP just to protect the interest of the government. He further said that the aim is to improve the governance, framework and bring transparency.
The guidelines extensively cover the composition of board, role of Chairman, responsibilities of Chief Executive and the Powers and functions of the board. It also describes about the meetings of the board, performance evaluation and other allied functions of the companies. The Senior Joint Secretary Ministry of Law, Justice and Human Rights, Abdul Malik Ghauri, briefed the Sub-Committee on the issue and endorsed the opinion of the Secretary, Ministry of Finance.
The Chairman Securities and Exchange Commission of Pakistan (SECP), Tahir Mahmood, briefed the Committee that the Articles of Association for a company have provisions to safeguard the interests of the government like any owner. He further added that the criteria of appointment of a director in the government owned companies are different from the private companies. He was of the view that it is the sole responsibility of Directors of the government-owned company to safeguard and watch the interests of government. The Chairman SECP said that Directors are bound to implement the instructions passed by the government from time to time otherwise the government has the right to remove them from their post under Section 183 of the Companies Ordinance, 1984. The government could also initiate criminal proceedings against them.
The Additional Auditor General, Malik Khadim Hussain, explained the Audit's point of view. He informed the Committee that only responsive and competitive Companies could get the space and share in the market. He said that the Audit has no objection on the powers of the Boards of Directors but there should be a system of check and balance to evaluate the performance of the Company within a specified time frame.
He gave the example of NESPAK, a company that had earned profit in billions of rupees but gave the dividend of only Rs 200,000 to the government. He further said that most companies do not follow the instructions of the government and that is why audit has to generate audit paras. The representative of the Audit also complained that the Directors of the Company are not competent enough and do not have the past experience of running a Company. He said that the government should appoint competent and experienced Directors on merit for the betterment and smooth functioning of the government Companies.