Accountability for public sector managers should be optimised at a level similar to that for private firms
As far as PSUs in India are concerned, it’s an old debate without any conclusion in sight. But it is imperative to arrive at an answer to this debate to reduce the loss to the exchequer and also to ensure that the real owners of the company – the citizens of India – are not made to pay for the dismal performance of these companies.
Why have public sector undertakings come to this sorry pass? The frequently asked questions are:
• Are these companies managed by highly incompetent people or is it that these people are not able to perform despite their best efforts and capabilities?
• Are these companies more corrupt compared to the other corporations and in more need of good governance?
• Are these companies less accountable compared to others?
• Is there a deliberate effort which has made them perform poorly in a booming economy?
The suggestion seems to be that the only antidote for all ailments they suffer from solution is to privatise or disinvest these companies. This simplification ignores the complexity of the Indian situation with regard to job creation, employment and public ownership of assets. The fact that in India more meaningful jobs can be created through these corporations is completely ignored.
If we go into the details of performance of PSUs, we find that the surge in the corporate sector has been achieved on account of support received from PSUs. There has been immense poaching of manpower from PSUs to establish successful businesses. A number of employees have been taken away and given the kind of lucrative compensation which is not possible in the public sector. Many of them migrate to these companies to the detriment of their parent company. Companies which come to India and set up base here look for a quick solution by employing some of the topmost public sector executives. How can the same employee who becomes an industrial leader overnight and creates enormous profits for a private company in his new avatar have been incompetent and inefficient? In management theory, there is a saying, “There are no bad workers, only bad managers”. In a garden, there are no bad plants, only bad gardeners. For managers, we can say that there are no bad managers but bad systems, restricting their performance, because given a chance an average manager can perform equally well and can do great things provided he is given enough space to play and enough motivation to perform.
I think, therefore, there cannot be any dispute on the fact that PSUs had created an army of trained manpower and professional managers and has been a nursery for providing management input to the rest of the corporates, viz., private companies, including multi-nationals setting up bases in India. Some of the most difficult tasks are being performed by these managers under the most challenging circumstances. Moreover, in family-run businesses, disputes surface the moment the family head abdicates or expires, creating enormous harm to the company and its shareholders. In PSUs, the change of CEO is comparatively smooth as there are enough competent persons to replace him.
The other issue which is most crucial is that of accountability. In the case of PSUs, it has been pointed out by analysts that in 250 working days in a year, the top management including the CEO has to spend more than 260 days on issues of accountability. Multi-layer agencies viz. Audit, CVC, CBI, CAG, Parliamentary Committees, questions raised in Parliament, to name a few, question the performance of PSUs. The plethora of enquiries and vigilance cases creates tremendous demoralisation and demotivates executives from quick decision-making.
Institutions like SCOPE have been founded to address such problems faced by PSUs. However, this debate bas not been taken in the right spirit because of the fear that it is not going to get support from the major institutions which are given these powers to question. Whereas the need for accountability is not being questioned and is paramount. Control of Parliament, CAG and CVC is also statutory in nature. However, we must bring in only that much of accountability which is required from the perspective of Company Law as applicable to other private companies. The private sector is accountable to its shareholders through the AGM, in addition to statutory bodies. A number of family businesses are going professional – selection of executives is out-sourced to professionals. Whereas in the case of PSUs which are being run by highly professional executives, this freedom is not available many times.
PSUs create jobs, enhancing economic well-being of the workforce by offering statutory wages and benefits. If PSU staff is fired, it will create a serious level of unemployment in the country. The private sector offers little job security or retirement benefits. The Prime Minister, who has been the main architect of reform, has often desired that the PSUs need to perform and the group formed for this purpose needs to look into this aspect.
The author is Director (F) of BSNL. The views expressed here are his own.