Public sector chiefs deserve better

Quarterly appraisal of ONGC's new chairman beats logic

The petroleum ministry’s reported proposal to appoint Shashi Shanker as chairman and managing director of ONGC with just a year’s validity is extraordinary. It is a classic example of all that is wrong with senior-level appointments in public sector companies. According to a report in The Indian Express, Petroleum Minister Dharmendra Pradhan has sought the approval of the Appointments Committee of the Cabinet (ACC) for Shanker’s appointment initially for a year, during which his ministry will conduct quarterly appraisal of his performance before seeking a fresh mandate for further employment. In defence of his decision, the minister has cited exploration challenges before ONGC to raise crude oil and natural gas output.

The minister is well within his rights to recommend his choice for the next CMD of ONGC. The question is why choose someone only to put him on trial from the very first day? After all, the Public Enterprises Selection Board (PESB) had shortlisted nine candidates for the top job and Pradhan had a wide choice to select the person he thought was most suitable for the job. India’s biggest oil and gas producer surely deserved better.

Also, at a time when there is a clamour for giving longer tenures to heads of public sector units so that they can make a meaningful contribution, this decision beats logic and shows why the government needs to institute a new process that incorporates the best practices for the selection of the leader of a public sector undertaking (PSU). 

Appointments to top positions in PSUs are now a lengthy and complicated process, with candidates selected by the PESB requiring clearances from the administrative ministry, Central Vigilance Commission and finally the ACC. These layers often delay the appointment. There have been several instances of the appointment panel finalised by the PESB being scrapped without reason, delaying the process further. The PESB itself should behave more professionally — there have been several cases where it initiated the selection process barely days before the current CMD was due to retire. The fallout: The PSUs concerned remain headless for months on end, leading to delays in taking critical decisions.

The situation is no better in other organisations. According to a report in this newspaper last month, the current chairman of the National Highways Authority of India (NHAI) is the fourth in a span of two years. 

In the past, several chairmen had a tenure of two to six months. This is strange for an organisation, which is in the thick of things on highways construction and needs more autonomy.

Some things never change, it seems. While Prime Minister Narendra Modi is particular about meritocracy, it appears that the principle does not apply to PSUs. Consider the large number of politicians affiliated with the ruling party appointed as independent directors of various PSUs. The question is how a politician with no experience in the core competence of the PSU concerned will add any value to the decision-making process. In that sense, the current government is no better than its predecessors.

The same story is being played out in public sector banks (PSB) as well. The current appointment process of board members has given rise to the ridiculous practice of bank chairmen having no say in who all are inducted as non-official directors. As a result, if some of these directors are of poor quality or get on to the board with parallel agendas, the chairman starts viewing them as unhelpful to the interests of the bank. That’s the reason why many bank boards have seen internal fissures leading to poor governance.

Similarly, the Banks Board Bureau, which the government set up with much fanfare as per the Indradhanush plan, doesn’t have any role in choosing the so-called non-official directors at the boards of PSBs, who typically constitute one-third of the directors. Besides, the Bureau can only recommend names for the position of managing directors. They are all scrutinised by the finance ministry. There have also been cases where the services of board members were terminated without consulting the Bureau.

In his book, former State Bank of India chairman P G Kakodkar has narrated the peculiar position he faced before retiring. On his last day as chairman, he called the finance secretary, who told him that the selection of his successor had been done, but it was awaiting the Prime Minister’s signature. 

Things have changed for the better now. Or have they?