1. PERFORMANCE BASED
CORPORATIZATION OF
PUBLIC SECTOR
Business Professional Conference
Corporate Pakistan 2013
Institute of Cost and Management Accountants of Pakistan
Mohammad Iqbal Ghori FCMA

2. Corporatization

Transformation of state owned enterprises, local,
provincial,
and
federal
organization
into
autonomous corporation.

Process to make over the state owned organization
and business interest into commercial oriented
companies to introduce corporate governance to
safeguard the interest of all stakeholders.

Corporatization is a precursor to partial or
full privitization, which involves a process where
formerly public functions and public enterprises
are sold to private business entities.

3. ROLE OF GOVERNMENT
Building “Firewall” between the Government's policy making role and ownership
role.
GoP
BoD
Management
Professional and commercially
oriented management selected
by the BoDs
Strengthening of BoDs as
envisioned under the
Companies’ Ordinance

4. Corporatization

Corporatization results improved transparency
and accountability.

Proper records of operations and business affairs.

Disclosure requirements.

Corporate entities gives rise to a well-regulated
and well-documented economic sector.

5. Corporatization in Pakistan

Corporatization was started on 8 October 1984 in
a vision to promote corporate sector.

The program was integrated in Privatization
program of Prime minister Nawaz Shairf.

6. DIFFICULTIES IN
CORPORATIZATION
Political intervention.
 Powerful Trade unions.
 Political CEOs.
 Uninformed Boards lacking competencies
and required experties.
 Personal or political interest of BoD.
 Immature and stubborn regulators.


7. Rubber Stamp Board
Operational Board
Symbolic Board
Approves without contest
or
consideration
Board makes operational
decisions
Circumvented and
powerless
Board has dedicated
offices in
the PSE
Not consulted on
decisions by
either management or
owners
Does not consider
alternatives
Limited role of nonexecutive
board members
Dominated by executives
Relies on information fed
by
executives
Does not see its role as
adding value
Board functions as an
extension of a
governmental
department
Focus on state
expectations
versus needs of the PSE
Limited strategic focus
Limited role of nonexecutive
board members
Not privy to key
discussions
between owners and
management with all
decisions
taken by owners
Often de-motivated for
lack of recognition,
influence and
impact
Source: Internet

8. DIFFICULTIES IN
CORPORATIZATION
BOD is devastating organizational hierarchy
 BoD is unaccustomed with PSE’s rules of
business
 Unwarranted discussion in BoD meeting
 Short term view
 Conflict of interest
 BoD compromises the opinion of professionals
 Undue dependency on consultants
 Uninformed BoD even ignorant of good
practice of Board room.


9. Expected Role of PSE’s Board









Responsibility for the organizational
performance.
Elimination of lethargic and bureaucratic
behavior in the organization.
Regulatory Compliance
Articulation of Business plan
Performance monitoring system
Performance based compensation in lieu of
national BPS.
Hunting and retention of Professionals
Succession Planning
Inculcation of transparency and accountability

10. Role of PSE’s Board
Cont…..









Finalization of Vision and Mission statement.
Manages potential conflicts of interest.
Avoid involvement in operational activities.
Formulation of policies.
Preparation of Financial Statement as IFRS.
Ensures financial statements are prepared.
Commercial oriented decision making process.
Corporate Social Responsibility.
Engagement of Stakeholders.

11. RECOMMENDATIONS





Political orientation toward the role of board and its
best practice.
Training of line Ministries officers i.e. Secretaries,
Additional Secretaries.
Orientation session by SECP before nomination.
Excellent communication between bureaucracy and
Politician.
Recruitment of effective boards to attracts
leadership.

12. RECOMENDATIONS

Performance Contract between BoD and GoP.

Implementation of Integrated Reporting in Public Sector
Entities.

Mandatory Third Party Corporate Governance Audit.

Establishment of Holding Company to formulate Policy and
monitor Performance.

Help construct talent pool for all sector

Public Transparency thru disclosure of results.

Articulation of Business plan and approval after negotiation

13. RECOMENDATIONS

Transparent and merit based selection and appointment of Board
of Directors.

Skilled Based Nomination Process.

Sector Specialist instead of Generalist.

Professional from at least Accounts/Audit, Law and H.R
Discipline .

Independent performance evaluation to eliminate conflicts of
interest.

14. Great governance is a journey,
Not a destination.
Past performance is, as the saying goes,
No guarantee of future success.
The board that becomes self‐ satisfied
Is a board that may underperform
Its full potential
And the organization’s needs.
Barry S. Bader

15. Thank You