ISLAMABAD: The chairman Board of Directors (BoD) of Pakistan Steel Mills (PSM) has expressed concern over the violations of various clauses of the State-Owned Enterprises (Governance and Operations) Act 2023 by the Ministry of Industries and Production.
In an official communiqué, Aamir Mumtaz Khan, the Chairman BoD of PSM to the Federal Secretary Ministry of Industries and Production has pointed out following eight violations of the aforementioned Act: (i) After the promulgation of the State-Owned Enterprises (Governance and Operations) Act, 2023 which was passed by the Parliament on 31st January 2023.
As per the provisions outlined in the ACT, the Board of Directors of state-owned enterprises have been granted autonomy and independence in carrying out their functions including the authority to appoint CEOs for all SOEs. Below is a quick summary of sections 17 through 22 of the Act for ready reference: “Section 17: The Board of a state-owned enterprise has autonomy and independence in carrying out its functions.
Administrative instructions from the Government are not applicable unless approved by the Government. State-owned enterprises should have independent procurement policies and comply with procurement standards. Until such policies are established, the Public Procurement Regulatory Authority Ordinance applies.
Section 18: The Board (or governing authority) shall appoint a Chief Executive Officer (CEO) under a performance-based contract for a specified period unless such period is already specified in the enactment governing the SOE; provided that the Board shall bring their existing arrangement with the CEO in line with this provision within one year of enactment of this law.
The CEO’s performance shall be regularly monitored, and there should be plans for their development and succession. Section 19: The Board is responsible for fulfilling obligations to the shareholders of the state-owned enterprise and keeping them informed.
The Board should establish a code of conduct for its members and employees to ensure professional standards and corporate values are maintained. Section 20: The Board is responsible for enforcing internal control systems. Any person found liable for deviation or violation of the code of conduct or internal control systems may face disciplinary proceedings. Section 21: The Board establishes an audit committee, with financially literate members, including independent directors.
(ii) Section 22: Board meetings should be held regularly at least once in every two months, and decisions are made by majority vote. Certain important decisions, such as appointing/removing the CEO, approving business plans, and selling significant assets, require a three-fourth majority. The Chairman has a casting vote in case of a tie”.
The State-Owned businesses (Governance and Operations) Act, 2023, whose provisions are outlined above, came into effect, bestowing autonomy and independence upon the Board of Directors of state-owned businesses in the execution of their responsibilities.
The State-Owned Enterprises (Governance and Operations) Act, 2023 section 17 states unequivocally that no administrative or standing instructions issued by any Federal Division may be applied to any state-owned enterprise unless the Federal Government has first granted its approval. If such instructions were already in place when the Act went into effect, they must be ratified by the federal government within six months, or they will be considered rescinded. Section-18 of the Act also stipulates that the Board is responsible for appointing the Chief Executive Officer (CEO), fulfilling obligations to the shareholders of the SOEs, approving business plans, and selling significant assets. Violations of the above laws and rules by the Ministry of Industries and Production
(iii) The Ministry of Industries and Production (MoI&P) has continued to overstep its authority in relation to the Board of Directors (BoD) after the Act was put into effect. In particular, the Ministry openly halted the 431st Board of Directors meeting, which was scheduled for March 28, 2024, via a letter dated March 27, 2024, even though the Additional Secretary-II (MoI&P) was serving as an ex-officio director on the PSM Board of Directors. The same meeting was rescheduled for May 9, 2024, however, the ministry via a letter dated May 7, 2024, once more asked to call off the meeting apparently with the intention of preventing the Board from considering the appointment of a regular CEO, which falls within the Board’s authority under the Act.
(iv) The Ministry of Industries and Production assigned the look after charge of CEO of PSM to Additional Secretary-I of the ministry to run the day to day affairs of PSM via its Office Order dated 3rd May 2024 in direct contravention of the Act’s provisions regarding the Board’s authority to appoint the CEO.
(v) Additionally, the Ministry has been passing direct written and oral instructions to the management of PSM’s letters dated 6th ) undermining the autonomy and independence granted to the Management and Board under the Act. MoI&P, via its letter dated May 06, 2024, passed instruction to PSM to make administrative changes which do not fall under the jurisdiction of the CEO. The Secretary/ principal accounting officer of the ministry has no authority to pass such directives to the PSM management. This is a clear and unacceptable violation of the State-Owned Enterprises (Governance & Operations) Act, 2023, which was enacted to improve the governance and operations of public sector entities.
(vi) After taking over the day-to-day affairs charge as CEO PSM on May 6, 2024, the Additional Secretary-I never visited the mills instead, he made judgments that went far beyond the scope of a typical CEO. The removal of the Corporate Secretary was one of the decisions made by the Additional Secretary-I in his capacity as CEO of PSM, despite the fact that the Corporate Secretary had a one-year contract in place in accordance with the BoD’s approval. According to PSC Corporate Governance Rules, the Board of Directors has the authority to appoint and remove the Secretary, hence the dismissal of the Board Secretary was against the rules.
(vii) The administration and operations of PSM have significantly deteriorated as a result of the decisions made by the Additional Secretary-I in the capacity of CEO of Pakistan Steel Mills. The closure of the Coke Oven Batteries without approval of the BoD was also unlawful.
(viii) The Cabinet Committee on SOEs constituted by the Prime Minister via notification dated 21st March 2024 must take notice of illegal position of Additional Secretary-1 as CEO of Pakistan Steel and various directions being implemented through the illegal CEO in Pakistan Steel Mills.
Copyright Business Recorder, 2024