As in the case of private enterprise, the board of directors of a PSE is the top management organ responsible for implementing the objective of PSE. But a PSE board is not nominated by the shareholders, but by the state which seeks to achieve certain declared socio-economic goals. The board owes allegiance to a political entity for its short term existence and long term survival.
Board policies and functions: PSE board is a statutory organization responsible for efficient and successful operation of an enterprise and it is supposed to have sufficient power to discharge its functions. In theory a PSE board has sufficient power, but in practice its powers gets diluted because of government interference. The Govt. keeps a close watch on the way the board functions and exercises its power and often interferes with the policy formulation in an important way. The board manages the enterprise as dictated by the Govt. The functions of the board are quiet akin to the Govt.’s function of legislation and policy making as opposed to execution of policies. The board acts as a trustee for efficient operation of the enterprise and in PSE this trust is not just a group of persons- the shareholders, but the nation as a whole, including particularly the consumers and labour employed in the enterprise. However, this is only one of the functions of the board, viz, efficient and economical management of a PSE so as to serve the best interest of the nation. But the board also performs an entrepreneurial function in the sense that it takes an active part in the decision making process of the enterprise. The executives functions of a PSE are performed by the managers and consists of necessary supervision, co-ordination of the activities so that Board’s policies are smoothly and properly implemented.
The functions of the PSE board are usually divided into four broad categories described below:-
(1) Establishment of basic policy including questions involving general strategy-
In general the basic policies “include such questions as the determination of the kind and the amount of the product or service to be produced, price policy, re-organization and development schemes, training and research programmes, labour problems including questions of wages, incentives, morale and consultation with employees, maintenance and improvement of organizational structure”. The general strategy includes such issues as parliamentary criticism of PSEs, criticism by the public at large, equation with ministers and other PSEs, the wider impact of the policy of as PSE from the broad social and national points of view.
(2) Decision on major financial matters-
Board takes decision on vital financial questions relating to new investment, fixed and continuous expenditure beyond prescribed limits, declaration of dividends etc.
(3) Selection of key personnel-
The third major function of a PSE board is to secure efficient and competent executives to get any enterprise going and to ensure smooth functioning of such an enterprise. Sufficient degree of autonomy in this matter is essential. PSE board in India is at liberty to create any post except at the board level and make appointments without any restriction on salary.
(4) Receiving reports on the working of the enterprise and passing judgment on them-
The board is under the legal obligation to keep itself well informed about all the necessary details of the operation of the PSE. This type of information provides necessary feed back for control purposes, i.e. for measuring the effectiveness of its policies and for future planning. Reports on diverse matters such as R&D, production, sales, IR, labour, turnover, financial position etc. give the board a rough and ready picture of the operation of the enterprise. Corrective measures, if necessary, can be taken in time on the basis of this report.