Retd PSU brass a big draw for private sector

Experts warn of conflict of interest,suggest clause in contract to prevent sharing of sensitive information in new job

The private sector continues to attract top PSU talent by offering higher pay packages and a challenging environment. While serving senior executives may still be difficult to find,retired PSU chiefs are a big draw. While the private sector gets access to the goodwill and understanding of the bureaucracy that PSU retirees bring to the table,corporate governance experts warn of potential conflict of interest.

Former SAIL chairman S K Roongta is the latest PSU chief to join Anil Aggarwal-promoted Vendanta Aluminum Ltd as its managing director. He will lead the aluminum business of the group including Balco. At least 20 such top PSU executives have joined the private sector in the recent past,and interestingly,most of them are working for corporate groups with operations in similar lines of business.

There is a conflict of interest. Unlike the US,where they have a non-compete clause in their employment agreement to ensure that they dont give any sensitive information,we dont have such sophisticated contracts here. The government must insist in the contract with PSU executives that they cant immediately work with the private sector after they have quit or retire from the public sector, ISB Professor Krishnamurthy Subramanian told The Indian Express.

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As per the present guidelines,directors on PSU boards are prohibited from joining a firm with which the PSU has had a business relationship for two years after they quit or retire. But they can join competitors. Some experts suggest an increase in the cooling off period. PRIME Databases Prithvi Haldea opines that though you cant deny employment opportunities to such people,conflict of interest certainly arises. I think the cooling off period should be increased to 3 years or provisions should be there to not allow them to work in the same sector, he said.

Roongta joins an burgeoning club of PSU executives or even bureaucrats who have joined companies that can potentially create conflict of interest situations. Former power secretary R V Shahi joined Energy Infratech Ltd that provides consulting services to power companies. Ashok Jha,former secretary,economic affairs,joined Hyundai as its President after retirement and later the Jignesh Shah-promoted MCX-SX.

The government has not been blind to this trend. Last year,it started tightening the guidelines relating to employment of PSU chiefs post retirement in the private sector. The Public Enterprises Selection Board,under the department of personnel and training,drafted a new Model Code of Ethics barring whole-time directors in PSUs from joining private sector Indian or foreign companies in the same line of business for one year after quitting,or retiring from,the PSU. So,they had to serve a year-long cooling off period.

According to Subramaniam,it is important for the government to anticipate such movements and accordingly work towards eliminating them. These people need to be paid salaries that match up with that in the private sector. They have not been paid well so they are looking to enhance their remuneration. They never earn close to what they contribute to the company. If paid more,the CEOs will guard the interest of the company.