Saturday, January 30, 2010

Taking Control of the Board of Governors

My first reaction to President Obama's announcement of his intention to appoint Paul Steven Miller and Dennis J. Toner to the Postal Service Board of Governors was that the appointments violated the spirit if not the letter of the Postal Accountability and Enhancement Act (PAEA). The PAEA modified the qualifications for the Board of Governors to add the requirement that at least four members Board "shall be chosen solely on the basis of their demonstrated ability in managing organizations or corporations (in either the public or private sector) that employ at least 50,000 employees." 39 US Code Sec. 202 (a)(1)  Neither of the two appointees have that experience..

Both of these proposed appointments meet all other requirerments for the Board of Governors.   They clearly have substantial experience in "experience in the field of public service, law or accounting."  

The current Board of Governors currently has one member with significant experience managing businesses or large organizations.  Louis J. Giuliano, Chairman of the Board of Governors is the former CEO and President of ITT Corp.  Retiring Governor Carolyn Lewis Gallagher was the President and Chief Executive Officer of Texwood Furniture, Inc., a manufacturer of educational furniture, but it is unclear whether Texwood had 50,000 employees.  The experience of all of the other Governors, including the experience of the two nominees, is in law or public service.  The Senate may need to ask the administration how it plans to increase the number of governors with the appropriate management experience to 4 members.

The two appointees do differ from the current board in one important respect that buttresses their case for appointment to the Board of Governors.   They have close personal and professional relationship with the White House.  Mr. Miller spent the past year working in the White House.  Mr. Toner has spent 30 years on the Senate staff of Vice President Biden including ten years as Deputy Chief of Staff.   The close ties suggest that the Obama Administration feels that it must take a more "hands-on" approach in dealing with the problems facing the Postal Service.   This is clearly different from the benign neglect that has characterized the postal policy of most Presidents since the passage of the Postal Reorganization Act.

In making these appointments, the Obama administration is taking seriously the federal government's role as the primary creditor and only shareholder of the Postal Service.   These appointments are not much different than what happened at GM, Chrysler, and AIG when the Federal Government traded loans for shares and made appointments to the boards of these companies.      Their appointments also suggest the administration may require changes in the size of the existing board in order to speed changes at the Postal Service, as a condition for changing the formula used to calculate the pension and retiree health care benefits of the Postal Service.

These appointees clearly will join the Board of Governors with the goal of putting the Obama administrations imprint on both senior management and strategic thinking at the Postal Service.   They will likely bring to the board ideas for turning around the financial position of the Postal Service, including those that require changes in the business model and regulatory framework, that were developed outside the confines of L'enfant Plaza.   It is possible that they may put significant pressure on existing senior management at the Postal Service to speed up the pace of change or risk the fate of Fritz Henderson, the former chairman of General Motors. 

In the coming weeks, Senators and their staff will vet these two nominees and eventually hold hearings on their appointment.   This process provides the Senate with a clear opportunity to determine the Obama administration's approach to postal policy and its current thinking about the Postal Service's challenges.   It is an opportunity that the Senate cannot afford to pass.


John said...

One of the big problems of the Board of Governors is that it represents big business more than it represents the public at large. The Board has hobbled the USPS and has insured that 1st class mail subsidizes Bulk (oh excuse me, Standard) Mail. The Public is not served when the USPS serves business first.

Anonymous said...

I agree with john, But I may add that the current governors and the Postmaster General are trying to privatize the PO.