Framework for appointment, evaluation, disclosure tightened

TAHIR AMIN

ISLAMABAD: The government has tightened the framework for appointment, evaluation, and conflict-of-interest disclosure of directors of state-owned enterprises (SOEs), requiring boards to justify the skills needed for new members and make annual performance evaluations and interest disclosures mandatory.

The Finance Division’s Central Monitoring Unit (CMU), through updated “Guidelines on Appointment, Evaluation and Disclosure for Boards of State-Owned Enterprises (SOEs) 2026,” has sought to strengthen transparency, accountability and effectiveness of SOE boards under the State-Owned Enterprises (Governance and Operations) Act, 2023 and the SOE Ownership and Management Policy 2023.

Under the revised framework, an SOE board facing a vacancy for an independent director will have to immediately submit recommendations to the Board Nominations Committee (BNC), identifying the skills, knowledge and experience already available on the board as well as those required from the prospective director.

Where a board’s tenure is approaching completion, it will have to submit its performance report to the BNC at least three months in advance. The report will include an assessment of the board’s performance against objectives, strategic policies adopted to achieve targets, comparative financial and non-financial performance, failures and their reasons, as well as gaps in the board’s skill set.

The BNC will be responsible for identifying and recommending candidates to the federal government for appointment as independent directors. The concerned ministry or division will also be required to provide the BNC with a working paper at least three days before consideration, including the SOE’s performance and proposed candidates.

Importantly, the guidelines require at least three candidates for each vacant position, with their experience and skill sets corresponding to the nature and scope of the SOE’s business. If a board fails to provide timely recommendations regarding required competencies, the BNC will conduct its own assessment.

The revised mechanism also seeks to prevent prolonged vacancies, requiring BNC recommendations to be submitted to the federal government at least one month before completion of an existing director’s tenure or as soon as a vacancy occurs. Following Federal Cabinet approval, the line ministry will notify the appointment and the concerned SOE will publish it on its official website.

Newly appointed directors who have not already completed a Directors Training Programme will be required to undergo the programme within three months of appointment, while SOE management will arrange orientation for new directors.

The government has also strengthened conflict-of-interest safeguards. Every SOE will have to maintain a register of interests, while directors facing conflicts will be required to abstain from discussions or voting on related matters. Their presence will also not count towards the quorum for such meetings.

Performance evaluation has been made a regular requirement, with boards and individual directors to be evaluated annually, at the end of their tenure or upon a director’s resignation. Approved evaluations will be shared with the CMU for maintaining a central directors’ database.