ISLAMABAD: After three decades of devolution, the Pakistan Muslim League-Nawaz government has silently restored powers of the prime minister to sack heads of public sector entities (PSE) without assigning reasons.
The government or the prime minister did not have the powers to remove a chief executive officer or managing director of a PSE under the Companies Ordinance of 1984 which had ensured that heads of such entities took independent commercial decisions in the best interest of the companies.
In fact, the powers to remove a chief executive were well defined in the 1984 law so that heads of public sector companies could not play in the hands of the government or any other interest group. The chief executives also had security of tenure under the law.
The chief executives of companies will now tend to follow written or verbal directives of the ministries concerned to save their jobs and, at the same time, try to balance rights and powers with boards of directors.
Informed sources told Dawn that amendments to the law were made following resistance in recent years by some chief executives who approached high courts against removal orders issued by respective ministries with the approval of the prime minister. The high courts had set aside the removal orders.
In one such example last year, the government had removed chief executive of Sui Northern Gas Pipelines Limited Arif Hameed when he refused to sign agreements relating to import of liquefied natural gas (LNG) and its sale to consumers on terms unacceptable to his company and the board of directors.
The Lahore High Court had set aside his removal order and the board of directors also turned down a government request to remove him through a majority vote until he tendered resignation to avoid inquiries.
Under the 1984 law, only “the directors of a company by resolution passed by not less than three-fourths of the total number of directors” could remove a chief executive before the expiration of his term of office notwithstanding anything contained in the articles or in any agreement between the company and the chief executive.
The government has changed this protection available to chief executives by adding a sub-clause to Section 191 of the Companies Ordinance 2016 promulgated on Nov 11, which says that the protections and conditions provided in the sections 186 and 187 shall not apply to a person nominated by the government.
Another new clause empowering the government to remove a chief executive or managing director of a state-owned company said the chief executive would “hold the office during the pleasure of the government”.
The change in the law will now enable the government to directly remove chief executives of about 100 public sector companies without requesting or manipulating the boards of directors in case heads of these companies decide to take independent decisions against the wishes of federal ministers and the Prime Minister Office.
The new law also empowered the government to nominate and appoint the chief executive of a company where majority of directors are nominated by it and such a nominee will “hold office during the pleasure of the government”.
Under the new law, the terms and conditions of appointment of a chief executive will be determined by the board or the company at a general meeting or by the government in case of a PSE.
It says: “The chief executive shall if he is not already a director of the company, be deemed to be its director and be entitled to all the rights and privileges, and subject to all the liabilities, of that office. No person who is ineligible to become a director of a company under section 153 or disqualified under sections 171 or 172 shall be appointed or continue as the chief executive of any company.”
Published in Dawn, December 2nd, 2016