Promulgates Ordinance Empowering Govt to Remove Independent Directors of SOEs
ISLAMABAD: Hours before the parliamentary sessions began, President Asif Ali Zardari promulgated an ordinance to eliminate a legal barrier preventing the government from dismissing the boards of loss-making power distribution companies (DISCOs).
The State-Owned Enterprises Governance and Operations Amendment Ordinance 2024, effective from June 5, 2024, grants the government temporary legal authority to remove independent directors on the boards of state-owned enterprises (SOEs). The ordinance, issued a day before the scheduled National Assembly and Senate sessions, underscores the government’s preference for ad hoc measures over legislative processes.
The ordinance’s lifespan is up to eight months, including a four-month extension from the National Assembly. The amendments to three sections of the SOE Act 2023 enable Prime Minister Shehbaz Sharif to execute his decision to sack the boards of eight DISCOs.
Significant changes have been made to Section 13 of the SOE law. Previously, directors held office for three years unless they resigned or were removed under specific provisions. The new ordinance introduces two conditions allowing the federal government to remove directors on the board nomination committee’s recommendation without inquiry.
On May 2, the board nomination committee, led by Power Minister Sardar Awais Leghari, recommended the removal of directors from all 10 DISCOs. However, the PM approved the removal of directors from eight companies, excluding Hyderabad and Sukkur DISCOs.
The Express Tribune reported last week that PM Sharif’s plan to eliminate political influence from the boards of eight DISCOs faced significant resistance. The SOE Act, effective from January 2023, conflicted with boards appointed before its enactment.
The board nomination committee advised the PM to remove the boards, citing Rs589 billion in losses due to bad governance and poor performance. These boards, appointed during the Pakistan Democratic Movement (PDM) government, faced immediate pressure and threats of legal action from their backers and members.
The ordinance also amends Section 4 of the SOE law, reducing the SOE policy’s scope by excluding the performance evaluation of ex-officio and independent directors. A new Section 3A has been added to Section 10, detailing the evaluation criteria for directors based on specific chapters of the Act.
Initially formed between July and November 2022, the boards were appointed based on coalition partners’ recommendations, resulting in political and relative appointments. The Power Division informed the Cabinet Committee on SOEs that all 10 government-owned DISCOs would incur Rs589 billion in losses this fiscal year due to poor performance.
By promulgating the ordinance, the government has now removed the legal threat posed by the statutory protection of these directors’ tenures.
Story by Shahbaz Rana
