Pakistan has rules for how boards govern companies. It now needs equally serious rules for how those boards are selected, how their performance is independently verified, and how their stewardship is handed over to the next board. Without that discipline, boards come and go every few years, public and minority-shareholder capital remains exposed and institutional memory is repeatedly lost.
GOVERNING COMPANIES
Pakistan has rules for how boards govern companies. It now needs equally serious rules for how those boards are selected, how their performance is independently verified, and how their stewardship is handed over to the next board. Without that discipline, boards come and go every few years, public and minority-shareholder capital remains exposed and institutional memory is repeatedly lost.
Government-owned and government-controlled companies were created and sustained with public resources. In listed entities, that public stake sits alongside capital invested by minority shareholders and ordinary members of the public. The government may exercise control, but it is not the only economic owner whose interests matter. Taxpayers, minority shareholders, employees, lenders, customers and the wider economy all bear the consequences of weak appointments, political turnover and unmeasured board performance.
The central reform proposed in this article is straightforward: every such board should begin its tenure with a disclosed, measurable mandate and end it with a factual performance and continuity report independently assured by a qualified audit firm. That report should then become a primary input for a professional, transparent board nominations process. This would create accountability not only inside the company, but for the board itself.
Boards are routinely constituted and reconstituted, often around a three-year cycle, with little public explanation of why particular chairpersons or directors were selected. When a board's tenure ends, there is usually no rigorous account of the baseline it inherited, the strategy it approved, the results achieved, the value protected or created, the failures encountered, and the work that must continue. A new board can therefore arrive with limited institutional memory and little obligation to distinguish between sound unfinished work and initiatives that should be stopped.
The solution cannot be a perception survey alone. Self-assessment has value; it is not independent evidence of performance. A board-performance review should be evidence based. As part of the annual audit cycle -- and through an expanded, separately defined assurance engagement where required -- the company's external audit firm, or another independent firm free of conflicts, should verify and report the board's performance against its approved mandate. The purpose would not be to ask auditors to judge whether every business decision was wise with hindsight. It would be to establish a disciplined factual record of what the board inherited, decided, monitored, delivered and left unfinished.
The independently assured tenure report should cover: the financial, operational, governance, risk, human-capital and cultural baseline inherited at the start of the term; the board-approved strategy, measurable targets, major capital commitments and principal risks; decisions taken by the board and the evidence used to oversee implementation by management; audited financial and operating outcomes, including results attributable to market conditions or government policy rather than board action; governance, transparency, automation, succession and sustainability improvements that became embedded in the institution; projects completed, projects in progress, initiatives discontinued, and commitments that did not produce the intended benefits; material unresolved exposures and a prioritised continuity agenda for the successor board; and the quality of the board-management relationship, while preserving the necessary distinction between oversight and execution.
The report should reconcile claims to audited accounts, approved board records, investment approvals, project milestones and other independently reviewable evidence. It should classify achievements clearly as completed, in progress, delayed, discontinued or not achieved. Commercially sensitive material can be protected, but confidentiality should not become a blanket excuse for concealing performance from shareholders and the public.
Five reforms that would change the system. One, publish a professional eligibility and skills framework. Before inviting or considering names, the government should disclose the company's strategic needs and the board skills required. The chairperson should be chosen for leadership, judgment, independence and the ability to build an effective board.
Two, reconstitute the board nominations committee. Its composition should command confidence for competence, character, integrity and independence. Political or administrative representation should not overwhelm professional judgment.
Every outgoing board should leave behind a verified account of stewardship. An incoming board should not begin with a blank sheet, nor should it be bound blindly to every inherited initiative
Three, make the selection process transparent and documented. The committee should use published criteria, a skills matrix, fit-and-proper checks, structured interviews, reference checks and recorded reasons for recommendations. Vacancies should be publicly advertised or filled through a transparent professional search process. The final appointment decision and any departure from the committee's recommendation should be explained.
Four, give every board a measurable mandate. At appointment, the government and shareholders should know the board's expected outcomes, the constraints it cannot control, and the indicators by which its stewardship will be assessed.
Five, require an independently assured end-of-tenure report. The nominations committee should review this report before selecting the next chairperson and members. It should identify capabilities needed to complete unfinished reforms, correct failures and respond to emerging risks. The report should also be presented to shareholders and made publicly accessible, subject only to narrowly defined confidentiality protections.
Pakistan State Oil provides a useful case study. When the federal government constituted a new Board of Management in February 2019, PSO faced shrinking fuel demand, stronger competition, rupee depreciation, high finance costs and large public-sector receivables. The following years brought a pandemic, an oil-price collapse, supply disruption, floods, inflation and sharply higher interest rates.
The record must therefore be judged carefully. Boards govern, appoint and evaluate leadership. Management executes. Government policy and economic conditions shape the playing field. Within that division of responsibility, PSO's audited record shows a stronger competitive position and a wider governance and transformation agenda, but also major unresolved exposures.
Market share rose from 42.4 per cent of liquid fuels in FY2019 to 50.4 per cent overall in FY2023. The retail footprint expanded and modernised; the business added Euro 5 fuels, electric-vehicle charging, digital payment and fleet solutions, and increased automation across terminals and retail sites. Governance disclosures recorded stronger attention to performance, risk, succession, procurement, automation and strategy.
These changes were not achieved by the Board alone. The MD and CEO, senior management and functional leaders bought into the strategic direction and converted it into executable programmes. Employees across PSO kept supplies moving through national crises, adopted new systems and delivered change in terminals, offices and retail operations. The relationship between the Board and management was unusually constructive.
A credible account must also state what was not achieved. The clearest unfinished task was cultural transformation. Policies, structures and systems can be approved during one tenure; deeply rooted behaviour takes longer. PSO did not fully embed the organisation-wide conviction that 'this is my company and I will protect its interests,' even when an issue fell outside one's own function. Functional silos and internal politics continued to inhibit collective ownership. Circular debt also remained beyond the power of the Board to resolve and exposed PSO to extreme financing pressure.
The annexures to PSO's 325th emergent Board meeting included a final Board paper intended to record what had been achieved since 2019 and what remained in progress. That was a valuable act of self-reflection and institutional memory. But self-reporting should be the starting point, not the final test. Its claims should be reconciled to audited accounts, approved minutes, project records and subsequently delivered outcomes.
This is the larger lesson from PSO: every outgoing board should leave behind a verified account of stewardship. An incoming board should not begin with a blank sheet, nor should it be bound blindly to every inherited initiative. It should be required to explain why a sound strategy was continued, changed or discontinued.
Government control does not dilute the rights of other shareholders. On the contrary, it increases the government's fiduciary responsibility to use control transparently and professionally. In a listed company, minority shareholders should not have to accept opaque board appointments, unexplained strategic reversals or the absence of a verified account of board performance merely because the state is the controlling influence.
The same discipline protects taxpayers. Public capital is not ownerless money. A state-controlled company may carry national obligations, but those obligations should be explicit, costed and governed. A board should not be blamed for policy burdens it cannot change; equally, it should not claim credit for favourable prices or circumstances it did not create. Independent assurance can make that distinction visible.
The government does not need to wait for the next corporate failure. It can establish a uniform board appointment and accountability framework for government-owned and government-controlled companies, adapted where necessary to company law, securities regulation and sector-specific statutes. The framework should require professional nomination, published selection criteria, measurable mandates, annual progress disclosure and independently assured tenure reporting.
The board nominations committee must sit at the centre of this reform. Its task should not be to process names supplied from above. It should be a professional body with the standing and independence to reject unsuitable candidates, identify missing capabilities and explain its recommendations. Before appointing a successor board, it should study the outgoing board's assured performance report and construct the new board's skills matrix around the company's actual next-stage needs.
Board reform, however, cannot succeed if the chief executive is selected through an equally opaque process. The board must have a decisive, professionally exercised role in appointing, evaluating and, where necessary, replacing the MD or CEO through published criteria, a documented search and a measurable performance contract. Boards govern and management executes; neither can succeed without the other. A weak or politically imposed chief executive can frustrate even a capable board, while a divided or intrusive Board can paralyze capable management. Appointment reform must therefore align the board,
the chief executive and the
organisation's long-term mandate without blurring their distinct responsibilities.
That single change would connect appointment with accountability and accountability with continuity. It would also create healthy competition among boards. Directors would know from the beginning that their commitments, decisions and results would be placed on a factual public record. Successor boards would inherit evidence rather than anecdotes. Shareholders would be better able to distinguish performance from publicity.
Pakistan needs capable boards and capable chief executives, but above all it needs a system that makes capability, integrity and results visible. The question should no longer be only who has been appointed. It should be: why were they appointed, what were they expected to achieve, what did they deliver, what did they fail to complete, and what verified record did they leave for those who follow?
The writer served aschairman of PSO's Board of Management during the period under review and was awarded the best director of the year by PICG in 2024.
