Will this help the PSUs?

Wed, 22 Feb Pre-Open

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Top management is what guides the direction of the entire organization. We have time and again stressed the importance of a good management while evaluating a company. Their vision, their proactive attitude and how they conduct business is what guides the long term valuations of the company. But what happens when there is no top management? Who guides the ship then?

Such is the case with the leading PSUs (Public Sector Undertakings) in the country. As per a leading daily, at present nearly a dozen PSUs do not have a full time Chairman or Managing Director. And the worst part is that some of these posts have been vacant for over a year. This includes companies like Coal India and Metals and Minerals Trading Corporation of India Ltd. (MMTC). So why is this happening? Is it that the country has run out of suitable talent to fill these positions? Or no one wants the job?

The truth is far from this. At present the process for hiring the top level management personnel is cumbersome. As a result, many of these posts remain vacant for a long time. Therefore the CII (Confederation of Indian Industries) has asked the government to streamline the process of appointing key functionaries in the PSUs. In a statement the CII has requested the government to shorten the selection process for appointments at the board levels. At the same time, it has also requested for active participation by the Chief Executive Officer (CEO) in the selection process. It has also suggested that the PSU boards should actively start grooming the next generation of key executives while they still hold their board positions. This way, the next line of command would be ready and groomed for the job before the vacancy comes up.

Succession planning and streamlined selection process is the need of the hour. Time and again the question of succession has popped up with several companies including the prestigious Tata Group and Infosys Ltd. This is not just true for the private companies but for the PSUs as well. But for the PSUs the problem is even worse because their actions are directly controlled by the government. Unless the selection procedure is streamlined and shortened, such vacancies would not get filled up in time. And eventually the absence of the top layer would start reflecting in deteriorating fundamentals for the companies. We hope the government listens to CII.