Politicians love media exposure. They are always thinking of the next election - votes matter. To garner votes politicians resort to various strategies - including setting up 56 companies. Since the matter is, or may become sub judice, I will tread carefully. Creating a company is in itself not a bad thing. But certain rules and management principles need to be followed:
1- The feasibility study. Before any entity undertakes a project (in this case the ex-Punjab government) a feasibility study needs to be done by a professional firm - not by the likes of Fawad Hasan Fawad or Ahad Cheema. The project feasibility needs to cover some basic issues like project cost, project location, commercial and marketing feasibility, debt/equity ratio, organization structure, Human Resource requirements, etc. etc.
2- Once completed, the feasibility needs to be examined and analyzed by the Competent Authority (in this case the Punjab Investment Board). They may ask for changes, amendments etc. Once finally approved the project feasibility has to be placed before the Punjab Cabinet. Questions need to be asked. However, once finally approved the 'Go ahead' signal is given.
3- A Board of Directors needs to be constituted to oversee and supervise the affairs of the company. The Companies Act 2017 issued by the SECP lays down strict parameters about the constitution of a BoD. BoD is the final authority in the management of a company. The chief minister of Punjab has no say in the decisions of the Board. In case of deviation the SECP can always step in.
4- The next step is the selection of a CEO. This is perhaps the most important decision in the whole process. The Human Resource Committee of the BOD needs to be constituted. Concurrently a HR firm specializing in executive search may be engaged. The potential CEO candidates need to be interviewed professionally. Finally, a short list of 2 or 3 candidates may be placed before the HR committee of the BoD. The compensation level could be market driven, but the initial financial constraints faced by the company may be kept in mind. Performance Bonus and incentives may be included in the offer.
5- Once on board, the CEO may create an organization structure, depending on the type of company (IT, Service, Manufacturing, etc.). The CEO should confine his direct reporters to a maximum of four. All these need to be approved by the BOD. The senior personnel may be hired transparently and on merit. Once the top 4 or 5 people are on board, the project starts. An external audit firm must be hired immediately. So too must an internal auditor. All procurement and contracts may be awarded as per rules of business. For major contracts, the BOD has to give approval.
Now the project takes off in earnest. Its success or failure depends on the commitment of the CEO and the top management. The BOD is ultimately responsible of oversight, or success or failure of the enterprise.
If the 56 companies under scrutiny in Punjab have followed this path, they have nothing to fear. If not, NAB awaits.
(The writer is the former Executive Director of the Management Association of Pakistan)
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