oversight

U.S. Postal Service: Issues Related to Governance of the Postal Service

Published by the Government Accountability Office on 1997-08-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Chairman, Subcommittee
                 on the Postal Service, Committee on
                 Government Reform and Oversight,
                 House of Representatives

August 1997
                 U.S. POSTAL SERVICE
                 Issues Related to
                 Governance of the
                 Postal Service




GAO/GGD-97-141
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      General Government Division

      B-272702

      August 14, 1997

      The Honorable John M. McHugh
      Chairman, Subcommittee on the Postal Service
      Committee on Government Reform and Oversight
      House of Representatives

      Dear Mr. Chairman:

      This report responds to your request that we obtain information on Postal
      Service governance issues. You indicated that the views of current and
      former members of the Postal Service’s Board of Governors would be
      particularly useful to the Subcommittee as it deliberates its current
      legislative proposal to reform the U.S. Postal Service (USPS).1 Our
      objectives in this report were to (1) identify any major areas of concern,
      including specific issues, that current and former members of the Postal
      Service Board of Governors have about the Board and their suggested
      legislative changes; (2) compare the major characteristics of the Postal
      Service’s Board of Governors with the characteristics of selected boards of
      other government-created corporations or corporation-like organizations2
      to identify similarities and dissimilarities—particularly as they relate to the
      major areas of concern identified by current and former Board members;
      and (3) provide additional information on governance issues that might be
      helpful to the Subcommittee as it deliberates Postal Service reform.

      We also discuss areas where some, but less than a majority of, current and
      former Board members indicated legislative attention is needed.
      Additionally, we identify governance topics discussed with current and
      former members where none believed legislative attention is needed.

      We draw no conclusions nor make any recommendations concerning the
      governance issues raised by the interviewees and their suggested
      legislative changes.




      1
       Postal Reform Act of 1997, H.R. 22, 105th Congress (1997).
      2
       As agreed with the Subcommittee, we did not restrict our comparisons to only those organizations
      legislatively designated as “government corporations.” Comparisons were made with The National
      Railroad Passenger Corporation (AMTRAK), Australia Post, Canada Post, Corporation for Public
      Broadcasting (CPB), Federal National Mortgage Association (Fannie Mae), Federal Deposit Insurance
      Corporation (FDIC), Federal Home Loan Mortgage Corporation (Freddie Mac), Rural Telephone Bank
      (RTB), and Tennessee Valley Authority (TVA). We also attempted to include the Communications
      Satellite Corporation (COMSAT) in our study. However, after agreeing to participate, COMSAT did not
      furnish the requested information.



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             The Postal Service is a corporation-like organization that was created by
Background   the government to provide postal services and to help bind the nation
             through the personal, educational, literary, and business correspondence
             of the people. Over the years, the government has created a number of
             corporations or corporation-like organizations to fulfill a variety of public
             functions or purposes of a predominately business nature. Historically,
             such organizations have been created on an individual need basis with the
             characteristics and functions of each being tailored to its specific mission.
             In general, these organizations can be identified under certain categories,
             such as wholly-owned government corporations, mixed-ownership
             government corporations, government-sponsored enterprises (GSE), or
             government-created private corporations. Grouping these
             government-created corporations and corporation-like organizations into
             these categories can be helpful because such organizations share certain
             common characteristics. However, for comparative purposes, it should be
             noted that even within these categories, the organizations are structured
             and governed in a variety of ways. Therefore, for purposes of this report,
             we found it more helpful to review each organization in our study
             individually without regard to any particular category under which it may
             be identified. Appendix I contains additional information about
             government-created corporations and corporation-like organizations.

             The Postal Reorganization Act of 1970 (1970 Act) created the Postal
             Service, designated it as an independent establishment of the executive
             branch, and created a Board of Governors to be its governing body. The
             Postal Service is not identified as falling under any particular category of
             government corporation or government-created corporation-like
             organization. The Postal Service has reported that it is not a government
             corporation; however, it is frequently considered by others to be one and
             has been previously included in major government corporation studies
             done over the last several years.

             According to the Postal Service, its Board of Governors is comparable to
             the board of directors of a private sector corporation. The Board of
             Governors directs the exercise of the powers of the Postal Service, directs
             and controls its expenditures, reviews its practices, and conducts
             long-range planning. It sets policy; participates in establishing postage
             rates; and takes up matters, such as mail delivery standards and capital
             investments and facilities projects exceeding $10 million. It also
             determines the pay of the Postmaster General (PMG) and approves the pay
             of other Postal Service officers. By statute, the Postal Service is to
             maintain compensation and benefits for all officers and employees on a



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                   standard of comparability with the private sector. However, no officer or
                   employee can receive pay in excess of the rate for level I of the Executive
                   Schedule—currently $148,400.

                   The Board consists of 11 members, including (1) 9 Governors appointed
                   by the president, with the advice and consent of the Senate, to 9 year
                   staggered terms; (2) the PMG, who is appointed by the Governors; and
                   (3) the Deputy Postmaster General (DPMG), who is appointed by the
                   Governors and the PMG.

                   By law, Governors are chosen to represent the public interest and cannot
                   be representatives of special interests. They serve part time and may be
                   removed only for cause. Not more than five of the nine Governors may
                   belong to the same political party. No other qualifications or restrictions
                   are specified in law. The 1970 Act provided for each Governor to receive
                   an annual salary of $10,000, plus $300 a day and travel expenses for not
                   more than 30 days of meetings each year.3 The act providing
                   appropriations4 to the Postal Service for fiscal year 1997 increased the
                   Governors’ annual salaries to $30,000 per year, but the $300 daily meeting
                   allowance remained unchanged.


                   A majority of current and former members of the Postal Service Board of
Results in Brief   Governors whom we interviewed said legislative attention was needed in
                   three broad areas. However, there was not a consensus among the
                   members on what the specific issues were within each area of concern, or
                   what legislative changes should be considered to address their concerns.
                   The major areas of concern were the Board’s authority, Board members’
                   compensation, and Board members’ qualifications. Within these broad
                   areas of concern, the most frequently cited issues were (1) the limitations
                   on the Board’s authority to establish postage rates; (2) the inability of the
                   Board to pay the PMG more than the rate for level I of the Executive
                   Schedule—currently $148,400; (3) the Board’s lack of pay comparability
                   with the private sector; and (4) qualification requirements that are too
                   general to ensure that Board appointees possess the kind of experience
                   necessary to oversee a major government business.



                   3
                   Public Law 99-190, enacted in December 1985, amended the 1970 Act to increase the number of paid
                   meeting days from 30 to 42.
                   4
                    The USPS is essentially a self-supporting organization; however, it is authorized to receive three types
                   of appropriations: public service, transitional costs, and revenue foregone. Appropriations received in
                   fiscal year 1996 totaled about $130 million, which accounted for about 0.2 percent of its total revenues.



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Our comparison of the Postal Service’s Board of Governors with nine
other boards of government-created organizations showed both
similarities and dissimilarities. Similarities indicate that these boards were
created to function much like private sector corporate boards. For
example, all 10 boards were exempted from some statutes and regulations
that other government departments and agencies are required to follow.
Dissimilarities, however, reflect the amount of flexibility the boards were
given to operate like private sector corporations. We noted many
differences reported among the selected government-created
organizations in ratemaking processes, compensation practices, and the
processes used to appoint board members. (See app. IV for detailed
information about similarities and dissimilarities among the boards of
selected government-created organizations.) For example, the Postal
Service’s ratemaking process requires that its rate increases be reviewed
by a third party; the ratemaking processes reported by five other
organizations included in our study did not involve a third-party review.

We also identified four broad areas where some of the interviewees, but
less than a majority, believed legislative attention was needed. These areas
were the Board’s mission and responsibilities, the Board’s relationship
with Postal management, the Board’s accountability and performance
measures, and Board composition. The most frequently cited issues in
these areas were (1) uncertainties as to how far the Board should go in
letting the Postal Service compete and operate like a private sector
corporation, (2) the limited specificity in law concerning the Board’s
oversight responsibilities, and (3) perceptions that the Chief Postal
Inspector may not have all the independence the position requires. Finally,
there were two areas that we raised for which none of the interviewees
believed legislative attention was warranted. These areas were Board
staffing and the Board’s legal status.

The interviewees’ concerns about many issues, such as Board authority,
accountability, and how far to let the Postal Service go in competing and
operating like a private sector corporation, are issues being grappled with
in the larger context of streamlining government operations. A recent
Congressional Research Service study prepared for the Senate Committee
on Governmental Affairs notes a renewed interest in government
corporations and discusses the probability that even more government
corporations will be created in the next decade as government struggles to
find ways to make organizations more productive.5 The study notes that
the major challenge will be holding government corporations accountable

5
 Managing the Public’s Business: Federal Government Corporations (S. Prt. 104-18, Apr. 1995).



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              for their policies and operations while at the same time allowing them
              sufficient financial and administrative discretion to operate efficiently and
              effectively—the same challenge that Congress faces in reforming the
              Postal Service.


              To identify current and former members’ areas of concern, including
Scope and     specific issues and their suggested legislative changes, we (1) interviewed
Methodology   all 11 members of the current Board (including the PMG and DPMG); and
              (2) interviewed 2 former Governors appointed after December 1, 1985,
              whom we were able to contact. We also interviewed the PMG’s predecessor
              and the PMG serving at the time of the 1970 Postal Service reorganization.
              The latter also served as the first Chairman of the Board of Governors.
              Appendix II lists the interviewees included in our study, position(s) held,
              and date(s) of appointment.

              We sent each interviewee a list of questions, judgmentally grouped into
              broad areas, prior to our interview. This list guided our interviews (see
              app. III). We asked each interviewee if he or she had any issues or
              concerns within each of the broad areas. If the interviewees had concerns,
              we asked them to elaborate and identify any specific legislative action(s)
              they believed Congress might want to consider. We also offered
              interviewees an opportunity to discuss any other concerns related to the
              Board.

              For each broad area discussed, we tallied the number of interviewees who
              believed legislative changes were either needed or not needed. If
              interviewees did not definitely answer yes or no, we did not include their
              answers in our tallies.

              To compare the characteristics of the boards of other government-created
              organizations with those of the Postal Service Board, we developed and
              sent a matrix to 11 boards,6 including the Postal Service Board. The matrix
              covered 73 characteristics, grouped in such broad categories as (1) the
              board’s mission and responsibilities, (2) the board’s authority, (3) board
              members’ compensation, and (4) board composition. In developing and
              refining our matrix and interview questions, we researched and reviewed
              available information on the structure and characteristics of public and
              private corporate boards, reviewed prior work we had done on
              government corporations, and consulted with knowledgeable individuals
              on Postal Service Board activities.

              6
               The matrix was sent to 11 boards; however, COMSAT did not furnish the information we requested.



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Except for the Postal Service, we judgmentally selected the
government-created organizations included in our study in order to have a
mix of the various types. We selected two government-sponsored
enterprises, two wholly-owned government corporations, two
mixed-ownership government corporations, and two federally created
private corporations.7 In making these selections, we used our recent
report on government corporations,8 as well as other prior work we had
done, to identify organizations of various types. To provide a broader
range of organizations for comparison purposes, we also selected two
foreign postal administrations—Canada Post and Australia Post. We
selected these organizations primarily because of our previous work in
this area.9 These organizations were described in a recent Price
Waterhouse report10 as among the most “progressive postal
administrations.”

In this report, we highlight differences between the Postal Service and the
other government-created organizations as they apply to the four issues
most frequently cited by current and former Board members as needing
legislative attention. Some of the other issues raised by the interviewees,
however, were outside the scope of our matrix. Therefore, we did not have
sufficient information to make comparisons with the other
government-created organizations on all of the issues raised by the
interviewees. Appendix IV contains selected details from the matrices. We
did not verify the boards’ responses to our matrix. However, we did ask
each of the boards that completed our matrix to review their respective
sections of appendix IV for accuracy.

To provide the Subcommittee with additional information on governance
issues that might be helpful in its deliberations on postal reform, we
reviewed a broad range of available literature affecting both public and
private boards. The result of our literature research is included in our
discussions of governance issues.




7
 COMSAT was one of the two federally created private corporations selected for inclusion in our
study.
8
 See our report Government Corporations: Profiles of Existing Corporations (GAO/GGD-96-14, Dec. 13,
1995).
9
 U.S. Postal Service: A Look at Other Countries’ Postal Reform Efforts (GAO/T-GGD-96-60, Jan. 25,
1996).
10
 A Strategic Review of Progressive Postal Administrations: Competition, Commercialization, and
Deregulation (Price Waterhouse LLP, Feb. 1995).



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                          We conducted our review at postal headquarters in Washington, D.C.,
                          between July 1996 and April 1997 in accordance with generally accepted
                          government auditing standards.

                          We requested comments on a draft of this report from the PMG and the
                          Chairman of the USPS Board of Governors. Their comments are discussed
                          at the end of this letter and included as appendixes V and VI, respectively.


                          A majority of the current and former members of the Postal Service Board
Areas Where a             of Governors whom we interviewed believed legislative attention may be
Majority of               warranted in three areas—the Board’s authority, Board members’
Interviewees Believed     compensation, and Board members’ qualifications. Although there was no
                          consensus among the members on the specific issues within each area of
Legislative Attention     concern, several issues were mentioned frequently, and a number of
Is Needed                 legislative changes were offered for consideration. The most frequently
                          cited issues were (1) the limitations on the Board’s authority to establish
                          postage rates; (2) the inability of the Board to pay the PMG more than the
                          rate for level I of the Executive Schedule—currently $148,400; (3) the
                          Board’s lack of pay comparability with the private sector; and
                          (4) qualification requirements that are too general to ensure that Board
                          appointees possess the kind of experience necessary to oversee a major
                          government business.


Board’s Authority to      The issue most frequently cited by current and former Postal Service
Establish Postage Rates   Board members as needing legislative attention was the limitations on the
                          Board’s authority to establish postage rates. Ten of the 15 interviewees
                          believed that the current ratemaking process adversely affects the Postal
                          Service’s ability to compete with its private sector competitors. They were
                          concerned that the current ratemaking process is too restrictive and
                          therefore limits the Postal Service’s ability to quickly adjust postage rates
                          in a highly competitive and rapidly changing marketplace. Three of the
                          remaining five interviewees did not comment specifically on this issue,
                          and two said the current ratemaking process should not be changed.

                          Under the current ratemaking process, the Postal Service, through its
                          Board of Governors, is to propose changes to the Postal Rate Commission
                          (PRC)—an independent regulatory agency established in the executive
                          branch—and request that it issue a recommended decision. PRC, after
                          holding public hearings and reviewing data provided by the Postal Service,
                          is to provide the Postal Service Board of Governors with its recommended



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decision concerning proposed rate changes. By law, this process can take
up to 10 months. After receiving a recommendation from PRC, the
Governors can approve, reject, or allow the recommended rates to take
effect under protest; or, under certain circumstances, the Governors can
modify a PRC decision. However, before the Governors can modify any
PRC-recommended rates, they are required to return the rate case to PRC for
reconsideration. After PRC renders a further rate decision, the nine
Governors can modify that decision only by a unanimous vote—a task that
some members said was almost impossible to achieve because, in their
experience, the Governors seldom agree unanimously on any issue. In fact,
there has been only one instance—in 1980—where the Governors
modified a PRC recommendation for First-Class postage.

Interviewees suggesting legislative attention in this area offered a number
of changes for consideration. Two suggestions were mentioned most
frequently. One suggestion was to use administrative law judges to hear
rate cases and make recommendations to the Board—rather than going
through PRC. The members believed this change would streamline the
ratemaking process and still give due consideration to the views of the
mailing community. The other suggestion was that the Board be given the
authority to override a PRC recommended rate decision with something
less than a unanimous vote. For example, suggestions were made that the
unanimous vote requirement be changed to either a majority or a
two-thirds majority vote. Other legislative changes offered for
consideration included (1) giving the Board authority to raise rates within
legislatively established parameters (e.g., allow the Board to raise postage
rates annually up to the increase in a designated index, such as the
Consumer Price Index11); (2) restricting PRC’s ratemaking role to monopoly
mail12—and a related suggestion allowing the Postal Service to establish
private sector-type subsidiary companies that would compete directly with
private carriers of nonmonopoly mail; and (3) legislatively requiring that
PRC render its rate decisions in much less time than the 10 months
currently allowed by law. One interviewee, however, said the law should
not be changed to require faster decisions from PRC because, given current
complex ratemaking requirements, it is unreasonable to expect faster
decisions. The two interviewees who said the current ratemaking process

11
  The Consumer Price Index measures average price change using a specified market basket
representing all goods and services purchased for everyday living. The index measures the same
basket relative to a designated base period.
12
 Monopoly mail is mail protected by the Private Express Statutes (laws that restrict the private
carriage of letter mail). See our reports U. S. Postal Service: Pricing Postal Services in a Competitive
Environment (GAO/GGD-92-49, Mar. 1992); and U.S. Postal Service: Postal Ratemaking in Need of
Change (GAO/GGD-96-8, Nov. 1995).



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should not be changed agreed that the current ratemaking process
negatively affected the Postal Service’s ability to compete with private
sector carriers. However, they believed a better way of addressing the
ratemaking issue was to create a PRC-type body to regulate private sector
carriers’ rates rather than change the ratemaking process within the Postal
Service.

Our survey of nine other government-created organizations showed some
similarity between the ratemaking processes of the Postal Service and the
processes reported by two other organizations—Australia Post and
Canada Post. No similarities were apparent at the other seven
organizations.

According to Australia Post, its Board of Directors sets prices for all
products and services. The board must notify the Minister for
Communications and the Arts of any intention to alter the price of the
standard postal rate and the Minister has the opportunity to disallow it.
Although it has no direct authority over the price, the Australian
Competition and Consumer Council has the opportunity to consider any
proposal and make its views known to the Minister as part of his/her
consideration of proposed price alterations.

According to Canada Post, its Board of Directors oversees virtually all
ratemaking decisions. This includes decisions for such products as basic
domestic and international single-piece letters, international printed
matter, and some registered mail products. Once new postage rate
regulations are proposed, interested parties are given a 60-day period
during which they can provide written comments on the rate change.

For various reasons, the ratemaking process at the Postal Service
contrasts sharply with the reported ratemaking processes at Fannie Mae,
Freddie Mac, AMTRAK, FDIC, and TVA. Each of these organizations is
permitted to set prices in a manner very much like any private sector
corporation—i.e., independent of a third-party review or approval.
Ratemaking processes at the RTB and the CPB are not comparable to the
Postal Service’s ratemaking process. At the RTB, its Board of Directors
makes loans at legislatively established rates. At the CPB, there are no
products or services sold and, therefore, no ratemaking procedures.

Proposed legislation introduced in Congress in January 1997 to reform the
Postal Service, H.R. 22, proposes significant changes to the ratemaking
process and to the long-standing relationship between the Postal Service



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and PRC. Current law requires that the Postal Service file a request with PRC
for changes in rates for services offered. H.R. 22 would change that
requirement. It would divide postal products into two categories,
noncompetitive mail and competitive mail.13 Noncompetitive mail would
include those products, such as First-Class Mail, for which there are few
alternatives to the Postal Service. For products in the noncompetitive mail
category, the Service would establish rates using a price cap based on the
Gross Domestic Product Chain-Type Price Index14 modified by an
adjustment factor, which PRC would determine every 5 years. Once the cap
was established, the Postal Service would generally be able to adjust
prices annually without filing a request for change with PRC.

Competitive mail, such as Express Mail, would include those products
facing full competition within the marketplace. The Postal Service could
price competitive products as it saw fit, without filing a request for change
with PRC. However, Postal Service pricing of competitive mail would be
subject to the constraints of the antitrust laws as well as requirements that
rates cover the Service’s costs and make a reasonable contribution to
overhead. PRC would conduct annual audits of the Postal Service to ensure
it was acting in compliance with the law with respect to both
noncompetitive and competitive products. Adoption of the ratemaking
proposals in H.R. 22 would increase the ratemaking similarities between
the Postal Service and Canada Post and Australia Post.

In testimony before your Subcommittee on the Postal Service on July 10,
1996, the PRC Chairman noted that proposed legislation to reform the
Postal Service included several proposals that would increase the Postal
Service’s flexibility to price its products. He also noted that under the
proposed ratemaking process, provisions for multiple reconsideration and
judicial reviews of rate decisions would be eliminated. Generally, the
Board has adjusted rates every 3 years or so against a backdrop of an
extensive body of public input. Under H.R. 22, the Board could be
adjusting many rates as often as annually. The PRC Chairman said that the
current system of multiple checks and balances is, in some instances, too
much of a good thing. At the same time, however, he cautioned about
going too far in the opposite direction.



13
 Generally, the terms “noncompetitive mail” and “competitive mail” are synonymous with “monopoly
mail” and “nonmonopoly mail.”
14
 The Gross Domestic Product is the value of all final goods and services produced within the borders
of the United States in a given period, whether produced by residents or nonresidents. The Gross
Domestic Product Chain-Type Price Index is the featured measure of prices in the national income and
products accounts. Changes in the price level are calculated using the weights of adjacent years.


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                           Ratemaking issues were again discussed at a hearing before your
                           Subcommittee on the Postal Service on April 9, 1997. Witnesses included
                           economists who helped formulate and design price cap plans for
                           telecommunications and utility regulatory entities, as well as experts in
                           antitrust laws, telecommunication regulation, postal arbitration, and
                           contracts. Differences in opinion among these witnesses as to how well
                           price caps would work for the Postal Service indicate that the debate over
                           the Postal Service’s pricing system and the roles of the Board of Governors
                           and PRC have not yet been resolved among all interested parties. The issue
                           of ratemaking is a central part of the ongoing congressional deliberations
                           related to the proposed postal reform legislation (H.R. 22).


Board’s Authority to Pay   The second most frequently cited issue was the Board’s inability to pay the
PMG                        PMG more than the rate for level I of the Executive Schedule—currently
                           $148,400.15 Eight of the 15 interviewees said the Board should be given
                           more flexibility to compensate the PMG so that pay could be more
                           comparable with the private sector. One interviewee strongly disagreed
                           that compensation changes were needed, and the other six interviewees
                           had no comment on the issue.

                           The eight interviewees who believed the Board should have more
                           flexibility to compensate the PMG were concerned that because of the pay
                           cap, the Board might have a difficult time filling future PMG vacancies with
                           highly qualified candidates. They were concerned that many highly
                           qualified candidates might not even consider the position of PMG because
                           of more financially lucrative positions in the private sector. These eight
                           interviewees suggested legislative consideration be given to removing the
                           pay cap on the PMG’s pay. As an alternative, one of the eight interviewees
                           said legislative consideration should be given to allowing the Board to
                           award the PMG performance-based bonuses over and above the legislated
                           pay cap.

                           The one interviewee with an opposing view did not believe the Board
                           would have a difficult time attracting highly qualified candidates to the PMG
                           position at the current salary. That interviewee said people are attracted to
                           the position because of its status and the desire to serve the public—not
                           because they are seeking a highly paid position.



                           15
                             By statute, all officers and employees of the Postal Service are to be paid at a level commensurate
                           with the private sector. However, that same statute restricts the Board from paying the PMG more
                           than level I of the Executive Schedule.



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Our survey of nine other government-created organizations showed that
the PMG’s pay is in line with the reported pay received by the top officials
in those organizations where pay is legislatively capped. Five of the nine
organizations had legislative pay caps similar to the Postal Service’s.
Those organizations were TVA, RTB, FDIC, AMTRAK, and the CPB. However,
two organizations—Fannie Mae and Freddie Mac—were not subject to
legislative pay caps. According to information provided by Fannie Mae and
Freddie Mac, the chief executive officers (CEO) at these two organizations
were paid substantially more than the PMG. Data provided show that in
1995, the CEOs at Fannie Mae and Freddie Mac were each paid more than
$1 million, compared to the $148,400 paid the PMG.

Our ability to make pay comparisons with the CEOs at Canada Post and
Australia Post was limited because both organizations said they consider
this information to be private. Information provided by Canada Post shows
its CEO’s pay is set by Canada’s Governor in Council16 and was in the
neighborhood of $200,000 (U.S.) in 1995.17 Australia Post did not provide
specific information on its CEO’s pay but said the pay is set at a level that
takes into account both public and private sector considerations.18

Executive compensation is, has been, and will likely continue to be, a
hotly debated issue in both the public and private sectors. Recent
literature on executive compensation in the private sector shows the issue
to be sharply focused on the amount of compensation paid executives in
comparison to the health of the company, returns to investors, and wages
paid nonmanagerial employees. For example, Business Week reported in
April 1997 that the average pay increase for top executives in U.S.
companies last year was 54 percent, compared with an average increase of
3 percent for U.S. factory workers. It also reported that the average CEO in
the United States was paid 209 times more than the average U.S. factory
worker. According to the literature, the spread in pay between these two
groups has continued to widen since the 1980s. As time passes, however,
more and more private sector executives are reportedly seeing their
compensation challenged by stockholders and employee unions who

16
  The Governor in Council is a special committee of the Cabinet with responsibility for approving
government regulations, including regulations for setting postal rates. For additional information on
ratemaking at Canada Post, see our report Postal Reform in Canada: Canada Post Corporation’s
Universal Service and Ratemaking (GAO/GGD-97-45BR, Mar. 5, 1997).
17
  Canada Post reported that its salary information is private. However, it stated that in fiscal year 1995,
the head of Canada Post was paid somewhere in the range of $189,000 to $233,000 (U.S. dollars).
18
 The PMG, in commenting on a draft of this report, provided additional information on CEO pay at
nine foreign postal administrations, including Canada Post and Australia Post. See appendix V for
additional information. We did not independently verify the information provided.



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                     perceive the pay of some executives to be exorbitant. Other attempts are
                     also being made to bring the issues surrounding executive pay to the
                     forefront. For example, the American Federation of Labor-Congress of
                     Industrial Organizations (AFL-CIO) launched an Internet site in April 1997 to
                     give the public ready access to information on executive compensation for
                     the Fortune 500 companies.19

                     Executive pay issues also exist within the public sector. The Senior
                     Executives Association20 has cited lifting the 3-year freeze on Executive
                     Level pay as one of its top priorities. Over time, the spread in pay between
                     executives and other employees has narrowed.

                     Along with the pay compression issue, Congress and the administration
                     have become increasingly concerned about executive compensation in
                     some government-created organizations and have been taking steps to
                     address some of those concerns. For example, in October 1995, the
                     President signed Executive Order 12976 requiring that certain bonuses
                     paid executives of designated government corporations be preapproved by
                     the Office of Management and Budget. Additionally, since 1992, Fannie
                     Mae and Freddie Mac have been prohibited from providing compensation
                     to any executive officer that is not reasonable and comparable with
                     compensation for employment in other similar organizations (including
                     other publicly held financial institutions or major financial services
                     companies) involving similar duties and responsibilities. Also, a significant
                     portion of potential compensation for executive officers must be based on
                     the performance of the enterprises. Further, Fannie Mae and Freddie Mac
                     are prohibited from entering into any severance agreement or contract
                     with an executive officer, unless the Director of the Office of Federal
                     Housing Enterprise Oversight of the Department of Housing and Urban
                     Development approves the agreement or contract in advance.


Board Members’ Pay   Although 12 of the 15 interviewees believed Board members’ pay was
                     another area warranting legislative attention, there was substantial
                     disagreement on the specific issues and possible legislative remedies.
                     Some interviewees thought Board members’ pay should be increased,
                     while others thought compensation should not be increased because
                     Board service should be considered public service. Others thought the


                     19
                       See http://aflcio.paywatch.org
                     20
                       The Senior Executives Association was founded in 1980 as a tax-exempt, nonprofit corporation
                     representing career federal executives. The Association concerns itself with those issues that affect
                     the career executive service as a whole.



                     Page 13                    GAO/GGD-97-141 Issues Related to Governance of the Postal Service
B-272702




daily meeting attendance fee should be increased. Others thought periodic
reviews of Board members’ pay should be required, and varying
combinations of these changes were also offered for consideration.

Six of the 15 interviewees said that even though Board members’ salaries
were increased from $10,000 to $30,000 in 1996, they were still below
private sector salaries and should be made more comparable. Five of the
15 interviewees also believed the law should be changed to increase the
$300 daily fee members are paid for attending Board meetings.
Interviewees who suggested legislative change were particularly
concerned that there is no legal requirement that pay be reviewed on a
periodic basis, and they pointed out that the time span between the last
two pay increases was 26 years.

Seven interviewees, however, said Board members’ salaries should not be
increased, and four said daily meeting attendance fees should not be
increased. Two interviewees did not comment on Board members’
salaries, and six did not comment on daily meeting attendance fees.
Interviewees opposing these suggested legislative changes were generally
of the opinion that Board service should be recognized as public service
and that Postal Service Governors should not expect compensation similar
to that found on private sector boards.

Our comparison of Postal Governors’ pay with the reported pay of board
members of nine other government-created organizations did not show
major disparities. In fact, we identified only two notable differences. First,
board members at Fannie Mae and Freddie Mac may elect to receive
shares of stock in lieu of cash compensation. Second, board members at
TVA and FDIC are paid more than Postal Service Governors, but they serve
full time. None of the interviewees believed Postal Board Governors
should serve full time.

As discussed earlier, compensation is an area of contention in both the
public and private sectors. Board members’ compensation, like CEOs’
compensation, is currently being examined from different angles by
various interest groups—e.g., stockholders and employee unions. Work
done by Spencer Stuart, a company that tracks board trends and practices
at 100 major American corporations, showed that private sector board
members’ annual salaries and meeting attendance fees averaged $55,300 in
1996 (ranging from $25,000 to $100,000).21 This compares to compensation

21
 This does not include additional stock that was awarded board members at 41 of the 100
corporations.



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                             B-272702




                             of about $38,000 that the Postal Service Governors will likely receive in
                             1997 (salary plus the historical average of daily meeting attendance fees).


Qualification Requirements   The final issue cited by a majority of current and former members as
for Board Membership         needing legislative attention was the lack of well-defined qualification
                             requirements for Board appointments. Eight of the 15 interviewees stated
                             that the statutes governing Board appointments are too general and should
                             be more precisely defined. Seven of the interviewees, however, said no
                             legislative change should be made in the appointment process. They were
                             generally of the opinion that the current process, which requires Senate
                             confirmation, ensures that highly qualified candidates are appointed to the
                             Board.

                             The eight interviewees who favored more precisely defined qualification
                             requirements believed that, historically, appointments to the Board have
                             not always been based on an individual’s demonstrated ability to govern
                             large corporations like the Postal Service. They were concerned that
                             because qualification requirements are not clearly defined in law, the
                             Board may not always have the most appropriate mix of skills for
                             effectively managing an organization as big and as complex as the Postal
                             Service. The interviewees suggested a number of legislative changes that
                             they believed could enhance the appointment process. These included
                             having an independent body make recommendations for Board
                             appointments and delineating, in law, specific requirements for Board
                             service. Examples of specific requirements mentioned included
                             (1) requiring that appointees have corporate experience, (2) requiring a
                             mix of geographic representation on the Board, and (3) requiring labor and
                             mailing industry representation on the Board.

                             The statutory restrictions/qualifications for board service at six of the
                             other nine government-created organizations included in our study were
                             more specific than the Postal Service’s. For example, at Fannie Mae and
                             Freddie Mac, four of the five presidential appointees to the board must
                             have specific business backgrounds: one must be from the mortgage
                             lending industry, one must be from the home building industry, one must
                             be from the real estate industry, and one must be from an organization
                             representing consumer interests. At the CPB, statutes require that the nine
                             appointed board members be selected from such fields as education,
                             cultural and civic affairs, or the arts. Board members are also to represent
                             various regions of the nation and professions, occupations, and various
                             kinds of talent and experience appropriate to the function and



                             Page 15             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
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responsibilities of the CPB. Additionally, of the nine board members, one is
to be selected from among individuals who represent the licensees and
permittees of public television stations, and one is to represent the
licensees and permittees of public radio stations. Australia Post and
AMTRAK statutes require that at least one board member have an
understanding of employee issues. The RTB statutes require that of the
Bank’s 13 board members, 3 be elected by stockholders of eligible
cooperative borrowers, and 3 be elected by stockholders of eligible
commercial borrowers.

The statutory qualifications for board service at the other three
government-created organizations included in our study (TVA, FDIC, and
Canada Post) were similar to the Postal Service’s qualifications in that
they were generally nonrestrictive. For example, requirements for board
membership at FDIC state only that the three appointed members must be
U.S. citizens and that no more than three of the five board members may
be members of the same political party.

Additionally, like the Postal Service, three of the other nine
government-created organizations included in our study have provisions
for ex officio membership on their boards. At the Postal Service, the PMG
and DPMG are ex officio members of the Board. At the RTB, there are five ex
officio members—all from the Department of Agriculture. Ex officio
members on the FDIC board include the Comptroller of the Currency and
the Director of the Office of Thrift Supervision. Additionally, one of the
presidentially appointed members also serves as the chair of the board and
full-time head of FDIC. The Secretary of Transportation and AMTRAK
president serve as ex officio members on AMTRAK’s board.

Current literature on private sector governance suggests that some aspects
of corporate governance have been undergoing changes in recent years.
Some stockholders, concerned with publicized instances of excessive
executive compensation, coupled with unacceptable corporate
performance, are increasingly scrutinizing governance issues, including
the qualifications of board members. An article in the spring 1995 issue of
Business Quarterly points to a lack of meaningful qualifications for board
members and a lack of needed expertise and knowledge as two areas that
could signal competence problems affecting board performance.22 The
article goes on to point out that healthy boards require, among other
things, a balance of qualifications, knowledge, skills, attitudes, and
experiences. Business literature suggests that now, more so than in

22
  Donald H. Thain and David S. R. Leighton, “Why Boards Fail,” Business Quarterly (Spring 1995), p. 71.



Page 16                    GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                        B-272702




                        previous eras, corporations are developing more well-defined criteria for
                        board membership—acknowledging that various roles on the board may
                        require various backgrounds and skills.

                        Although conceptually it may be desirable to have board representation
                        for all stakeholders, it presents a real challenge to do so within the Postal
                        Service structure. The Postal Service, unlike many other corporate and
                        corporate-like organizations, has numerous stakeholders with widely
                        varying interests and concerns, e.g., rural patrons, inner-city patrons,
                        business mailers, six labor unions, and three management associations. If
                        qualification requirements are changed, one challenge for Congress will be
                        determining what qualifications or special interests, if any, should be
                        represented on the Board.


                        In our discussions with current and former members of the Postal Service
Areas Where Some,       Board of Governors, we also identified areas where some, but less than a
but Less Than a         majority of, interviewees believed legislative attention is needed. Those
Majority of,            areas were (1) the Board’s mission and responsibilities, (2) the Board’s
                        relationship with postal management, (3) the Board’s accountability and
Interviewees Believed   performance measures, and (4) the Board’s composition and structure.
Legislative Attention
                        Additionally, our review of pertinent literature indicated that others have
Is Needed               expressed concerns within these same four areas as they relate to
                        government-created organizations in general. A recurring theme in this
                        literature focuses on accountability. For example, in April 1995,23 the
                        Congressional Research Service reported that a key issue for policymakers
                        is how to make government corporations politically accountable for their
                        policies and operations while still giving them the necessary financial and
                        administrative discretion to function in a commercial manner. An article in
                        the February 1995 issue of Government Executive also expressed concern
                        that quasi-government organizations are largely unaccountable for their
                        actions.24

                        Some of the current and former Postal Service Board members we spoke
                        with had the following specific concerns in these four areas. Also, where
                        applicable, we have included as part of our discussion other related issues
                        identified as part of our literature search.



                        23
                          See S. Prt. 104-18, April 1995.
                        24
                          Clyde Linsley, “Government Inc.,” Government Executive (Feb. 1995).



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                    B-272702




Board Mission and   Six interviewees cited the Board’s mission and responsibilities as an area
Responsibilities    needing legislative attention. Concerns in this area centered on two issues.
                    One issue was the Board’s uncertainty as to how far it should go in letting
                    the Postal Service compete and operate like a private sector corporation.
                    The other issue concerned the limited specificity in law concerning the
                    Board’s oversight responsibilities.

                    Four of the six interviewees said that uncertainties about how far the
                    Postal Service should go in competing with the private sector are not
                    helped by the Postal Service’s current legal designation. By law, the Postal
                    Service is designated as an independent establishment in the executive
                    branch. One interviewee characterized this situation by saying that the
                    Postal Service’s current legal designation places it in the unenviable
                    position of being “neither fish nor fowl,” i.e., neither an executive agency
                    nor a private corporation. The four interviewees suggested that Congress
                    consider clarifying the Postal Service’s legal designation, which, in turn,
                    should provide a clearer picture of the Service’s mission.25

                    Legal status questions are not unique to the Postal Service. Such questions
                    are being raised with regard to government-created organizations in
                    general. Unclear legal definitions are disconcerting to some, while others
                    use it to their advantage. For example, a fellow at both the National
                    Academy of Public Administration (NAPA) and the Johns Hopkins Center
                    for the Study of American Government said government-created
                    organizations can generally choose whatever legal status best suits their
                    purposes.26 He cited a 1977 incident in which the Secretary of Housing and
                    Urban Development instructed Fannie Mae to increase its mortgage
                    purchases in the inner cities. Fannie Mae replied that, as a private agency,
                    its principal obligation was to its stockholders, who would object to its
                    investing in riskier properties. A few years later, however, when the
                    administration attempted to strip away some of Fannie Mae’s special
                    privileges, such as its tax exemptions, Fannie Mae responded, “Congress
                    established Fannie Mae to run efficiently as an agency, not as a fully
                    private company.” Without those special relationships, Fannie Mae said, it
                    would not be able to survive.

                    While discussing the Postal Service Board’s mission and responsibilities,
                    four of the six interviewees said the Board could benefit from more

                    25
                     Seven of the nine interviewees who did not believe legislative attention was needed to clarify the
                    Board’s mission and responsibilities specifically stated that they were opposed to changing the Postal
                    Service’s legal designation.
                    26
                      Clyde Linsley, “Government Inc.,” Government Executive (Feb. 1995).



                    Page 18                   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                               B-272702




                               detailed guidance concerning its oversight responsibilities. They suggested
                               that Congress consider making the law more specific. They were
                               concerned that the broad guidance currently in law does not always
                               provide them with a good basis for knowing Congress’ desires as the
                               Postal Service moves toward the 21st century.


Board Relationship With        Five interviewees cited the Board’s relationship with postal management
Postal Management              as an area needing legislative attention. The most frequently cited issue
                               related to perceptions that the position of Chief Postal Inspector did not
                               have all the independence necessary. Four of the five interviewees said
                               that to help ensure the Chief Postal Inspector’s independence, he/she
                               should be appointed by the Board and be directly accountable to the
                               Board—similar to the status of the Postal Service’s recently appointed
                               Inspector General. They said the Chief Postal Inspector should not be
                               appointed by, or be considered part of, management.

                               The five interviewees also had three other suggestions for legislative
                               consideration in this area, but no one suggestion was cited by more than
                               two of the interviewees. The specific suggestions included the following.

                           •   The Postal Service’s General Counsel should be appointed by the Board
                               and be directly accountable to the Board—similar to the suggestion
                               concerning the Chief Postal Inspector.
                           •   The law should require that the PMG be appointed from within the Postal
                               Service. This suggestion stemmed from the belief that the Postal Service’s
                               size and complexity makes it very difficult for an outsider to be an
                               effective Postmaster General during the early years of his/her
                               appointment.
                           •   The PMG and DPMG should be allowed to vote on all matters that come
                               before the Board, except for personnel matters relating directly to them.
                               This suggestion was made to make the PMG and DPMG a more integral part
                               of the Board. Currently, the PMG and DMPG are prohibited from voting on
                               some issues that come before the Board, e.g., increases in postage rates.


Board Accountability and       Six interviewees cited Board accountability and performance measures as
Performance Measures           another area needing legislative attention, although no one issue was cited
                               by more than two of the interviewees. Specific suggestions for legislative
                               consideration included the following.




                               Page 19            GAO/GGD-97-141 Issues Related to Governance of the Postal Service
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                        •   Periodic peer reviews should be required as a prerequisite for continued
                            service on the Board.
                        •   The fiduciary responsibilities of Board members should be more clearly
                            delineated in law—particularly in light of the Postal Service’s current legal
                            status.
                        •   Specific actions for which the Board will be held accountable should be
                            clearly delineated in law.
                        •   A mechanism should be established for removing nonproductive Board
                            members. One of the interviewees, however, cautioned against such an
                            action, citing the potential for abuse.

                            Although the interviewees discussed accountability from a boardroom
                            perspective, it is, in fact, a topic pertinent to all facets of organizational
                            life. As discussed earlier, accountability is an issue being grappled with as
                            the government examines its corporations and corporation-like
                            organizations. Defining accountability in government begins with clearly
                            establishing who is accountable to whom, and for what.


Board Composition and       Four interviewees cited Board composition and structure as an area
Structure                   needing legislative attention, but no one issue was cited by more than two
                            of the interviewees. Specific suggestions for legislative attention included
                            the following.

                        •   The current 9-year appointments to the Board are too long and should be
                            shortened. Appointments should be made more comparable to the private
                            sector, where terms are generally for no more than 3 years.27
                        •   Board members should be prohibited from serving more than one term.
                        •   Former Postal Service employees should be prohibited from serving on
                            the Board.
                        •   The process for selecting a Chair should be changed. The Chair should be
                            appointed by the president rather than elected by the Board.
                        •   The PMG should be designated, in law, as the permanent Chair of the
                            Board.
                        •   The law should be clarified to explicitly state that the PMG can be elected
                            Chair by the members.
                        •   Management should have only one, not two, seats on the Board.




                            27
                              Five of the 15 interviewees, however, specifically said they were opposed to shorter terms. They
                            thought 9-year terms were appropriate given the amount of time required to become well versed in
                            postal issues.



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                       There were two areas discussed where none of the current or former
Areas Where None of    Board members interviewed believed legislative attention is needed. These
the Interviewees       areas were (1) Board staffing and (2) the Board’s legal status.
Believed Legislative
                       All of the interviewees agreed that Board staffing was an internal
Attention Is Needed    management issue and not an issue warranting legislative attention. They
                       said the Board has the authority to hire as many staff as it needs to fulfill
                       its responsibilities. Most individuals believed that the current staff,
                       consisting of two professionals and two administrative staff, is adequate.
                       However, four interviewees believed that the Board should consider
                       expanding its staff to include experts in such areas as real estate, finance,
                       and ratemaking. Nevertheless, they agreed that any decision to hire
                       additional staff should be made by the Board itself, not by legislative fiat.

                       Additionally, current and former Board members we spoke with saw no
                       need for legislative action to change the Board’s legal status. The Board of
                       Governors is part of the Postal Service and does not have a separate legal
                       status. Nevertheless, discussion of the Board’s legal status prompted
                       several interviewees to reiterate their concerns about the Postal Service’s
                       legal status. As noted earlier, some interviewees believed that the current
                       legal definition of the Postal Service—an independent establishment of the
                       executive branch—is unclear and causes uncertainties about how far the
                       Postal Service can go in competing with the private sector.


                       The PMG and the Chairman of the Postal Service Board of Governors
Agency Comments        provided written comments on a draft of this report. The PMG said most of
                       the issues raised in the report speak for themselves and have been
                       discussed by the Governors and PMGs for many years. His comments also
                       included supplemental information on compensation practices at TVA and
                       CEO pay at nine foreign postal administrations plus the USPS. His comments
                       are reproduced in appendix V.

                       The Chairman of the Postal Service Board of Governors said in his written
                       comments that the report provides valuable information on governance
                       issues and how other boards function. He also said many of the issues
                       raised in the report have been discussed by the various Boards of the
                       Postal Service over the years. His comments are reproduced in appendix
                       VI.

                       Program personnel at the nine other organizations included in this report
                       for comparison purposes were provided copies of a draft of appendix IV



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for their review and comment. The program personnel at two of the nine
(AMTRAK and CPB) organizations said the information was accurate as
presented. Program personnel at the other seven organizations either
provided additional information or made technical suggestions that have
been incorporated into the appendix as appropriate.


We are sending copies of this report to the Ranking Minority Member of
your Subcommittee, the Chair and Ranking Minority Member of the Senate
oversight subcommittee, the Postal Service Board of Governors, the PMG,
and other interested parties. Copies will also be made available to others
upon request.

Major contributors to this report are listed in appendix VII. If you have any
questions about the report, please call me on (202) 512-4232.

Sincerely yours,




Bernard L. Ungar
Director, Government Business
Operations Issues




Page 22             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Page 23   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Contents



Letter                                                                                            1


Appendix I                                                                                       26

Descriptions of
Various
Government-Created
Organizations
Appendix II                                                                                      28

Current and Former
Postal Service Board
Members Interviewed
Appendix III                                                                                     29

Interview Guide
Appendix IV                                                                                      32

Selected
Characteristics of the
Postal Service’s Board
of Governors and
Other Boards
Appendix V                                                                                       53

Comments From the
U.S. Postal Service
Appendix VI                                                                                      55

Comments From the
U.S. Postal Service
Board of Governors



                         Page 24   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                        Contents




Appendix VII                                                                                            56

Major Contributors to
This Report




                        Abbreviations

                        AFL-CIO    American Federation of Labor-Congress of Industrial
                                        Organizations
                        AMTRAK     National Railroad Passenger Corporation
                        CEO        chief executive officer
                        COMSAT     Communications Satellite Corporation
                        CPB        Corporation for Public Broadcasting
                        DPMG       Deputy Postmaster General
                        FDIC       Federal Deposit Insurance Corporation
                        GSE        government-sponsored enterprise
                        NAPA       National Academy of Public Administration
                        PMG        Postmaster General
                        PRC        Postal Rate Commission
                        RTB        Rural Telephone Bank
                        TVA        Tennessee Valley Authority
                        USPS       U.S. Postal Service


                        Page 25           GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix I

Descriptions of Various
Government-Created Organizations

              The organizations we selected to compare with the Postal Service Board
              of Governors are generally identified as wholly-owned government
              corporations, mixed-ownership government corporations, GSEs, or
              federally created private corporations. In addition, we compared the
              boards of two selected foreign postal administrations with the Board of
              Governors of the Postal Service.

              Although there is no authoritative definition for the term “government
              corporation,” there are certain characteristics common to government
              corporations that were identified by President Truman in 1948 and that
              have been referred to and accepted over the years by public
              administration experts. According to President Truman, a corporate form
              of organization is appropriate for the administration of government
              programs that are predominately of a business nature, produce revenue
              and are potentially self-sustaining, involve a large number of business-type
              transactions with the public, and require a greater flexibility than the
              customary type of appropriations budget ordinarily permits.

              In 1981, NAPA defined a wholly-owned government corporation as a
              corporation pursuing a government mission assigned in its enabling
              statute, financed by appropriations, with assets owned by the government
              and controlled by board members or an administrator appointed by the
              president or a department secretary. It defined a mixed-ownership
              government corporation as a corporation with both government and
              private equity, with assets owned and controlled by board members
              selected by both the president and private stockholders, and as usually
              intended for transition to the private sector.28 Of the organizations
              selected for this study, TVA and the RTB are wholly-owned government
              corporations, and FDIC and AMTRAK are generally considered to be
              mixed-ownership government corporations.

              GSEs are federally established, privately owned corporations designed to
              increase the flow of credit to specific economic sectors. GSEs typically
              receive their financing from private investment, and the credit markets
              perceive that GSEs have implied federal financial backing. GSEs issue
              capital stock and short- and long-term debt instruments, issue
              mortgage-backed securities, fund designated activities, and collect fees for
              guarantees and other services. GSEs generally do not receive government
              appropriations. Fannie Mae and Freddie Mac are two examples of GSEs.



              28
                See Report on Government Corporations, Vols. I-II (Washington, D.C.: NAPA, 1981).



              Page 26                   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix I
Descriptions of Various
Government-Created Organizations




The CPB is a federally created private, nonprofit corporation. It does not
consider itself to be a government corporation or a GSE. However, it does
receive at least some of its operating funds from yearly federal
appropriations and has been considered to be a government corporation
by others.




Page 27              GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix II

Current and Former Postal Service Board
Members Interviewed


              Name                       Position(s) held              Date(s) of appointment
              Susan E. Alvarado          Current Governor              July 1988
              Winton M. Blount           Former PMG                    January 1969
                                         Former Board Chair            July 1971
              Michael Coughlin           Current DPMG                  January 1987
              LeGree S. Daniels          Current Governor              August 1990
              Einar V. Dyhrkopp          Current Governor              November 1993
              S. David Fineman           Current Governor              May 1995
              Anthony M. Frank           Former PMG                    February 1988
              Tirso del Junco            Current Board Chair           July 1988, Reappointed
                                                                       December 1991
              Bert H. Mackie             Current Governor              December 1988
              Ned R. McWherter           Current Governor              October 1995
              Norma Pace                 Former Governor               May 1987
              Robert F. Rider            Current Governor              May 1995, Reappointed
                                                                       June 1996
              Marvin Runyon              Current PMG                   July 1992
              Robert Setrakian           Former Governor               December 1985
              Sam Winters                Current Governor              November 1991




              Page 28             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix III

Interview Guide


                       1. Are you satisfied with the statutory relationship between the PMG and
Relationship Between   the Board? If not, why? Should anything be changed in law/regulation?
PMG and Board
                       2. Aside from the statutory/regulatory relationship between the PMG and
                       the Board, are there other issues dealing with the relationship that you
                       would like to see addressed? If so, please explain your position and cite
                       examples.


                       1. Are you satisfied with the Board’s statutory relationship with PRC? If not,
Board’s Relationship   why? Should anything be changed in law/regulation?
to PRC
                       2. Do you believe PRC provides the Board with sufficient information to
                       meet the Board’s needs? Is information provided in a timely manner?

                       If the information is not sufficient and/or timely, what changes do you
                       believe are needed?


                       1. How does the Board get involved in setting goals and developing
Board’s Mission and    implementation strategies for the Postal Service?
Responsibilities
                       2. Are you satisfied with the Board’s mission and responsibilities as
                       specified in legislation? If not, why?

                       3. Are you satisfied with the Board’s mission and responsibilities as further
                       defined by the Bylaws? If not, please cite examples and discuss any
                       changes you believe are needed.


                       1. Are there any statutory authorities the Board does not have that you
Board’s Authority      believe it should have? If so, please explain.

                       2. Are there any statutory authorities the Board has that need to be
                       expanded or contracted?


                       1. Is the Board’s legal status satisfactory, or are legislative changes
Board’s Legal Status   needed? If so, what changes are needed and why? Provide examples
                       supporting the need for any change in the legal status of the Board.




                       Page 29             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                       Appendix III
                       Interview Guide




                       1. Do you believe there are Board accountability issues that need to be
Board’s                addressed with regard to the Board as a collective unit? If so, what are
Accountability and     those issues?
Performance
                       2. To whom are individual Board members accountable?
Measures
                       3. Are there accountability issues that need to be addressed with regard to
                       the performance of individual Board members? If so, what are those
                       issues?

                       4. In general, how are ethical or conflict of interest issues addressed? Are
                       you satisfied with the guidance available in this area?


                       1. Is the new pay level adequate? If not, please explain why.
Board’s Compensation
                       2. Do you believe benefits are adequate in relation to other boards (other
                       board directors may receive stock options, health insurance, life
                       insurance, etc.)? If not, how should they be adjusted?

                       3. Are travel reimbursements adequate? If not, where do they fall short?


                       1. Do the current size and composition of the Board allow the Board to
Board’s Composition/   effectively perform its duties?
Qualifications
                       2. Are the qualifications/restrictions for Board membership adequate, or
                       should more specific qualifications be spelled out in legislation? If more
                       specific qualifications are needed, please state why and cite examples of
                       how more specific qualifications would have been helpful in past
                       situations.

                       3. Do you serve on any other boards? If so, how many and which ones?

                       Do you believe there should be a limit on the number of boards on which
                       members can serve?

                       4. Should service on the Postal Service Board of Governors be changed
                       from part time to full time? Explain.




                       Page 30             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
              Appendix III
              Interview Guide




              1. Do you believe that the Board has sufficient staff resources? If not, what
Board Staff   additional staff are needed (numbers, qualifications, etc.)?




              Page 31             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix IV

Selected Characteristics of the Postal
Service’s Board of Governors and Other
Boards

Organization the board
directs                  USPS                        Fannie Mae                Freddie Mac                TVA
Organization background
Legal status             Independent                 Government-sponsored      Government-sponsored       Wholly-owned
                         establishment of the        enterprise                enterprise                 government corporation
                         executive branch of the
                         United States
                         government

Legal authority          Postal Reorganization       Federal National        Federal Home Loan            Tennessee Valley
                         Act of 1970 and             Mortgage Association    Mortgage Corporation         Authority Act of 1933
                         amendments                  Charter Act, as amended Act, as amended              and amendments

                         [39 U.S.C.]                 [12 U.S.C. 1716-1723d]    [12 U.S.C. 1451-1459]      [16 U.S.C. 831-831dd]



Created                  July 1, 1971                June 27, 1934             July 24, 1970              May 18, 1933




                                           Page 32                   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                    Appendix IV
                                    Selected Characteristics of the Postal
                                    Service’s Board of Governors and Other
                                    Boards




RTB                 FDIC            AMTRAK                CPB                   Canada Post           Australia Post


Wholly-owned        Mixed-          Mixed-                Private, nonprofit    “Parent Crown       Federal government
government          ownership       ownership             corporation           Corporation” (fully business enterprise
corporationa        government      government            organized under       owned by the Crown) (fully owned by the
                    corporation     corporation           D.C. law                                  Commonwealth
                                                                                                    Government of
                                                                                                    Australia)
7 U.S.C. 941-950b   12 U.S.C.       49 U.S.C. 240101 et 47 U.S.C. 396 et al.    Canada Post           Australia Postal
                    1811-1835a      seq.                                        Corporation (CPC)     Corporation Act of
                                                                                Act 1980 and          1989 and
                                                                                amendments            amendments

                                                                                [CPCA
                                                                                1980-81-82-83, c.54
                                                                                and amendments]
May 7, 1971         June 16, 1933   March 30, 1971        March 27, 1968        October 16, 1981      January 1, 1989b
                                                                                                                (continued)




                                    Page 33                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                            Appendix IV
                                            Selected Characteristics of the Postal
                                            Service’s Board of Governors and Other
                                            Boards




Organization the board
directs                  USPS                         Fannie Mae                    Freddie Mac                   TVA
Mission/                 To provide postal            To provide stability in the   To provide stability in the   To improve the
purpose                  services to bind the         secondary market for          secondary market for          navigability of the
                         nation through the           residential mortgages;        residential mortgages;        Tennessee River;
                         personal, educational,       respond appropriately to      respond appropriately to      provide for flood control,
                         literary, and business       the private capital           the private capital           reforestation, the proper
                         correspondence of the        market; provide ongoing       market; provide ongoing       use of marginal lands,
                         people; and to provide       assistance to the             assistance to the             and the agricultural and
                         prompt, reliable, and        secondary market for          secondary market for          industrial development of
                         efficient service to         residential mortgages         residential mortgages         the Tennessee Valley;
                         patrons in all areas and     (including activities         (including activities         provide for the national
                         to render postal services    relating to mortgages on      relating to mortgages on      defense; and provide an
                         to all communities.          housing for low- and          housing for low- and          ample supply of electric
                                                      moderate-income               moderate-income               power to seven-state
                                                      families involving a          families involving a          region in the
                                                      reasonable economic           reasonable economic           southeastern United
                                                      return that may be less       return that may be less       States.
                                                      than the return earned        than the return earned
                                                      on other activities) by       on other activities) by
                                                      increasing the liquidity of   increasing the liquidity of
                                                      mortgage investments          mortgage investments
                                                      and improving the             and improving the
                                                      distribution of investment    distribution of investment
                                                      capital available for         capital available for
                                                      residential mortgage          residential mortgage
                                                      financing; and promote        financing; and promote
                                                      access to mortgage            access to mortgage
                                                      credit throughout the         credit throughout the
                                                      nation (including central     nation (including central
                                                      cities, rural areas, and      cities, rural areas, and
                                                      underserved areas) by         underserved areas) by
                                                      increasing the liquidity of   increasing the liquidity of
                                                      mortgage investments          mortgage investments
                                                      and improving the             and improving the
                                                      distribution of investment    distribution of investment
                                                      capital available for         capital available for
                                                      residential mortgage          residential mortgage
                                                      financing.                    financing.




                                            Page 34                    GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                            Appendix IV
                                            Selected Characteristics of the Postal
                                            Service’s Board of Governors and Other
                                            Boards




RTB                 FDIC                    AMTRAK                  CPB                      Canada Post             Australia Post
To obtain an          To insure deposits    To provide intercity    To facilitate the full   To establish and        To supply postal
adequate supply of of banks and             and commuter rail       development of           operate a postal        services within
supplemental funds, savings associations.   passenger               public                   service for the         Australia and
to the extent                               transportation in the   telecommunications.      collection,             between Australia
feasible, from                              United States.                                   transmission, and       and places outside
nonfederal sources                                                                           delivery of             Australia. Australia
to (1) make loans to                                                                         messages,               Post is also able to
corporations and                                                                             information, funds,     carry on any
public bodies for the                                                                        and goods both          business or activity,
purpose of financing                                                                         within Canada and       either in Australia or
or refinancing the                                                                           between Canada          overseas, relating to
construction,                                                                                and places outside      the supply of postal
improvement,                                                                                 Canada;                 service.
expansion,                                                                                   manufacture and
acquisition, and                                                                             provide such            Australia Post may
operation of                                                                                 products and to         also carry on any
telephone lines,                                                                             provide such            business or activity
facilities, and                                                                              services as are, in     that is conveniently
systems; and (2)                                                                             the opinion of the      carried on by use of
conduct its                                                                                  Corporation,            resources not
operations, to the                                                                           necessary or            immediately
extent practicable,                                                                          incidental to the       required in
on a self-sustaining                                                                         postal service          performing the
basis.                                                                                       provided by the         principal function or
                                                                                             Corporation; and        in the course of
                                                                                             provide to or on        performing the
                                                                                             behalf of               principal function.
                                                                                             departments and
                                                                                             agencies of, and
                                                                                             corporation owned,
                                                                                             controlled, or
                                                                                             operated by, the
                                                                                             Government of
                                                                                             Canada or a
                                                                                             provincial, regional,
                                                                                             or municipal
                                                                                             government in
                                                                                             Canada or to any
                                                                                             person services
                                                                                             that, in the opinion
                                                                                             of the Corporation,
                                                                                             are capable of
                                                                                             being conveniently
                                                                                             provided in the
                                                                                             course of carrying
                                                                                             out the other objects
                                                                                             of the Corporation.
                                                                                                                                (continued)




                                            Page 35                 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                              Appendix IV
                                              Selected Characteristics of the Postal
                                              Service’s Board of Governors and Other
                                              Boards




Organization the board
directs                    USPS                         Fannie Mae                 Freddie Mac                  TVA
Board authority
Description of board’s     Postal rates are             The Board has unilateral   Freddie Mac’s charter       TVA’s board has
authority to set prices,   determined in                authority to conduct       explicitly provides that    exclusive authority to set
rates, etc.                conjunction with a Postal    business operations, but   Freddie Mac has full        prices, rates, etc., for the
                           Rate Commission (PRC)        generally day-to-day       discretion in setting       products or services that
                           recommendation. The          business activities are    prices and other            TVA sells.
                           Governors may approve        delegated to               business operations.        The TVA act contains
                           a PRC-recommended            management subject to                                  standards for
                           change; accept               provisions of charter.     There are no regulatory     determining appropriate
                           recommended change                                      or other external limits on levels for TVA’s electric
                           under protest; reject or,                               the authority of Freddie    power rates but commits
                           in limited circumstances,                               Mac’s management to         the fixing of those rates
                           modify recommended                                      set prices for mortgages to the discretion of the
                           change.                                                 it purchases and the        TVA board and
                                                                                   securities it issues.       precludes judicial review
                           PRC is an independent                                                               thereof.
                           agency that acts upon
                           requests from the USPS                                                               With one exception, no
                           or in response to                                                                    statutory provision
                           complaints filed by                                                                  authorizes another
                           interested parties.                                                                  person, board, or
                           Among its major                                                                      commission to set or
                           responsibilities are to                                                              review prices.c
                           submit recommended
                           decisions to the USPS on
                           postage rates and fees
                           and mail classifications,
                           issue advisory opinions
                           to the USPS on
                           proposed nationwide
                           changes in postal
                           services, and submit
                           recommendations for
                           changes in the mail
                           classification schedule.
Does board set pay for     Yes, Governors set pay       Yes, the Board is          Yes, the Board of         Yes, the board sets
CEO?                       of the PMG, subject to       authorized to fix          Directors determines      compensation for all TVA
                           limitations of 39 U.S.C.     compensation for the       compensation of officers. employees. Salary for
                           1003(a); i.e., salary        officers of the                                      regular employees may
                           cannot exceed the rate       Corporation.                                         not exceed that received
                           for Level I of the                                                                by board members.
                           Executive Schedule.




Does board set benefits    Yes, subject to              Yes, the Board is          Yes, the Board of            Yes, the board sets
for CEO?                   restrictions of Federal      authorized to fix          Directors determines         compensation, including
                           Retirement and Workers       compensation for           benefits of officers.        benefits, for all
                           Compensation Laws.           officers of the                                         appointees.
                                                        Corporation.




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                                                  Appendix IV
                                                  Selected Characteristics of the Postal
                                                  Service’s Board of Governors and Other
                                                  Boards




RTB                     FDIC                      AMTRAK                    CPB                     Canada Post              Australia Post


The only product of     The board has             The board has             The board has the       The board, directly      The board sets
RTB is loans. Loans     unilateral authority to   unilateral authority to   authority to approve    or indirectly through    prices for all
are to be made in       grant or deny             set prices, rates,        prices; however, it     delegation of            products and
accordance with the     deposit insurance to      etc., without review      has no products to      authority to the         services. The board
requirements            financial institutions.   or approval by an         sell. Specifically,     President/CEO,           must notify the
contained in the        Board decisions are       independent               CPB is not a            oversees virtually all   Minister of any
Rural Electrification   not subject to            regulatory authority.     commodity business.     rate-making              intention to alter the
Act, Section 408(a).    approval by another                                                         decisions. The           price of the
Interest rates are      regulatory authority.                                                       board, in delegating     standard postal rate
determined by a                                                                                     its authority, has       (the reserved
formula set by law in                                                                               established that (1)     service), and the
the Act, Section                                                                                    all rates established    Minister has the
408(b).                                                                                             through regulation       opportunity to
                                                                                                    (i.e., noncompetitive    disallow it.
The U.S.                                                                                            products) require
Department of                                                                                       approval of the          The Australian
Agriculture Rural                                                                                   board, (2) all           Competition and
Utilities Service is                                                                                generic rates (rates     Consumer Council,
responsible for the                                                                                 available to anyone      while having no
day-to-day                                                                                          meeting specified        direct authority over
operation of RTB,                                                                                   terms and                the price, has the
and Congress                                                                                        conditions)              opportunity to
maintains regulatory                                                                                established outside      consider any
authority.                                                                                          of regulation require    proposal and make
                                                                                                    the President/CEO’s      its views known to
                                                                                                    approval, and (3) all    the Minister as part
                                                                                                    sales agreements         of his/her
                                                                                                    (generic or              consideration of
                                                                                                    non-generic) are         proposed price
                                                                                                    subject to the           alterations.
                                                                                                    board’s delegation
                                                                                                    of authority
                                                                                                    instrument and
                                                                                                    related processes.
No.                     No, the pay of the    Yes.                          Yes, but president      No, the CEO’s pay is Yes.
                        Chair of the Board                                  may not be              set by Governor in
                        (“CEO”) is                                          compensated at an       Council.
                        determined by                                       annual rate of pay
                        reference to Federal                                that exceeds the
                        Statutes—Level III of                               rate of basic pay in
                        the Executive                                       effect from time to
                        Schedule.                                           time for Level I of
                                                                            the Executive
                                                                            Schedule under
                                                                            Sec. 5312 of Title 5.
No.                     Yes.                      Yes, under 49             Yes.                    No, benefits are set     Yes.
                                                  U.S.C. § 24303(b).                                by the Governor in
                                                                                                    Council.


                                                                                                                                        (continued)



                                                  Page 37                   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                    Appendix IV
                                    Selected Characteristics of the Postal
                                    Service’s Board of Governors and Other
                                    Boards




Organization the board
directs                  USPS                 Fannie Mae                 Freddie Mac               TVA
CEO compensation         $148,400             $800,000 salary;           $865,000 salary;          Not applicable.
(FY95)d                                       $833,263 bonus; and        $394,000 bonus; and
                                              $23,102 other annual       $100,688 other annual
                                              compensation, as well as   compensation, as well as
                                              long-term compensation     long-term compensation
                                              in the form of stock       in the form of restricted
                                              awards and securities      stock awards and
                                              options.                   securities options.




                                    Page 38                  GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                                Appendix IV
                                                Selected Characteristics of the Postal
                                                Service’s Board of Governors and Other
                                                Boards




RTB                     FDIC                    AMTRAK                   CPB                  Canada Post              Australia Post
Annual                  The Chair’s total pay   The CEO’s                $148,400             This is not              Not publicly
compensation is to      and benefits            compensation does                             considered public        available.e
conform to              compensation for        not exceed the                                information.e
provisions of the       FY95 was                Federal Executive                                                 Terms and
federal executive       $147,014.74.            Level I salary scale.                         However, the CPC    conditions are set at
salary schedule.                                                                              Board contact       a level that takes
                                                The CEO receives                              provided a range of into account both
$108,200 salary and                             the following                                                     public and private
                                                                                              salary that is public:
approximately 20%                               benefits: health                              $189,000 to         sector
of that for benefits                            insurance, an                                 $233,000 (U.S.      considerations. Prior
for the Administrator                           employer-paid                                 dollars).           consultation with the
of Rural Utilities                              retirement income                                                 Remuneration
Services, who                                   plan, a 401(k)                                The benefit package Tribunal is part of
serves as the CEO                               retirement savings                            is worth about 20% the process of
of the telephone                                plan, life and                                of salary.          establishing a
bank.                                           accidental death                                                  package.
                                                and disability
                                                insurance, split
                                                dollar life insurance,
                                                business travel
                                                accident insurance,
                                                short-term and
                                                long-term disability
                                                benefits, United
                                                States Railroad
                                                retirement benefits
                                                as well as paid
                                                vacation and sick
                                                leave, rail pass
                                                privileges,
                                                educational
                                                assistance, parking,
                                                and relocation
                                                benefits.
                                                                                                                                 (continued)




                                                Page 39                  GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                               Appendix IV
                                               Selected Characteristics of the Postal
                                               Service’s Board of Governors and Other
                                               Boards




Organization the board
directs                     USPS                         Fannie Mae               Freddie Mac                 TVA
Board compensation
Description of how          For Governors, salary        Board advised by         Pursuant to a resolution    Salary of TVA Board
salaries and benefits for   and reimbursable             outside experts on       adopted by the board,       Chair is established
Board members are           expenses determined by       appropriate levels of    the 15 outside directors    under Level III of the
determined and              statute.                     compensation based on    receive an annual           Executive Schedule
approved                                                 payments made by         retainer, annual award of   Salary.
                            Governors determine          comparable businesses.   stock options and
                            pay of PMG and DPMG                                   restricted stock, and       The salary of the other
                            within legislatively                                  meeting attendance          two members of the TVA
                            established parameters.                               fees.                       board is established
                                                                                                              under Level IV of the
                                                                                  They do not receive         Executive Schedule.
                                                                                  salaries or other           Benefits available to
                                                                                  employee benefits.          board members are
                                                                                                              those generally available
                                                                                                              to federal employees,
                                                                                                              including presidential
                                                                                                              appointees, by statute.

  Description of how        Governors’ salaries are      Generally annual  Board members receive              The Chairman and two
  increases in salaries     set by legislation. From     adjustments.      cash fees and stock                directors of the TVA
  and other benefits        1970 to 1995, there were                       awards as their                    board are positions
  occur                     no salary increases. In Board is advised by    compensation.                      covered by level III and
                            1996, salaries were     outside experts on     Adjustments for inflation          level IV, respectively, of
                            increased by legislation.
                                                    appropriate levels of  are not included in the            the Executive Schedule
                                                    compensation based on criteria for setting                (5 U.S.C. §5314 and
                            PMG and DPMG salaries payments made by         compensation. However,             §5315).
                            are set by the          comparable businesses. from time to time Freddie          Increases in pay are
                            Governors, subject to a                        Mac reviews the                    done through the
                            pay cap.                                       compensation package               legislative process.
                                                                           for board members to
                            Increases in pay are                           ensure that it remains
                            done through the                               competitive.
                            legislative process.
Is member service full or Full time for PMG and          Full time for 3          Part time. Board            Full time
part time?                DPMG.                          management employees     members provide
                                                         and part time for        service year round.
                            Part time for Governors.     rest of board, who are   There is no fixed-hour
                                                         outside management       requirement for service.
                                                         directors.




                                               Page 40                 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                            Appendix IV
                                            Selected Characteristics of the Postal
                                            Service’s Board of Governors and Other
                                            Boards




RTB                   FDIC                  AMTRAK                CPB                   Canada Post            Australia Post


Determined by         Salary is determined Pay and expenses       By statute.           Determined by the    Determined by an
statute.              under federal        are set by statute.                          Governor in Council. independent central
                      statutes —Level III                                                                    remuneration
                      of the Executive                                                                       tribunal.
                      Schedule for
                      Chairperson and
                      Level IV for other
                      members.




Salaries and          Board members’        Adjustment would      Salaries and          Increases are not      The Remuneration
benefits have not     salaries are set by   require legislative   benefits may be       made on a regular      Tribunal regularly
been increased        statute (5 U.S.C.     change.               changed by an act     basis. They are        examines
since establishment   §5314 and §5315)                            of Congress at any    made following a       remuneration levels
of Board in 1971.     under appropriate                           time.                 recommendation         and will consult with
Adjustments would     executive levels.                                                 from the Minister      the board on
be made               Changes would be                                                  responsible for        specific issues.
legislatively.        done legislatively.                                               Canada Post to the
                                                                                        Governor in Council.
                                                                                        The last adjustment
                                                                                        was made by the
                                                                                        Governor in Council
                                                                                        in 1990.


Part time             Full time             Part time             Part time             Part time              Full time for
                                                                                                               Managing Director
                                                                                                               and part time for
                                                                                                               other Directors.


                                                                                                                          (continued)




                                            Page 41                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                                 Appendix IV
                                                 Selected Characteristics of the Postal
                                                 Service’s Board of Governors and Other
                                                 Boards




Organization the board
directs                    USPS                            Fannie Mae                  Freddie Mac                  TVA
Current annual salary of   $30,000 plus $300 a day         $23,000 retainer            $20,000 retainer         Effective January 1, 1996:
board members              for not more than 42            annually, plus $1,000 for   annually, prorated based
                           days of meetings per            attending each board or     on the quarter in which  $115,700 for Board
                           year for Governors.             board committee             they were appointed.     members
                                                           meeting.
                           $148,400 salary for PMG                                      Directors also were paid    $123,100 for Chairman
                                                           Committee chairs             $1,000 for attendance at
                           $148,000 salary for             received an additional       each meeting of the         Board service is full time;
                           DPMG                            $500 for each committee      board or any board          therefore, no daily
                                                           meeting they chaired.        committee meeting and       meeting attendance fees
                                                                                        were reimbursed for         paid.
                                                           Additionally, each           out-of-pocket costs of
                                                           nonmanagement director attending such meetings.
                                                           has restricted common
                                                           stock under the Fannie       Each board committee
                                                           Mae Restricted Stock         chairman also received
                                                           Plan for Directors and       an annual retainer of
                                                           stock options under the $2,500.
                                                           Fannie Mae Stock
                                                           Compensation Plan of         Pursuant to the 1995
                                                           1993. Fannie Mae             Directors’ Stock
                                                           officers who serve on the Compensation Plan,f
                                                           Board of Directors do not each Director was
                                                           receive compensation         granted options to
                                                           for serving as directors     purchase 2,400 shares
                                                           other than the               of the Corporation’s
                                                           compensation they            common stock and
                                                           receive as Fannie Mae        received shares of
                                                           officers. Fannie Mae         restricted stock having a
                                                           officers are not eligible to fair market value of
                                                           participate in the Fannie approximately $10,000
                                                           Mae Restricted Stock         on the date of the award.
                                                           Plan for Directors and
                                                           are not eligible to receive
                                                           nonmanagement director
                                                           stock options under the
                                                           Fannie Mae Stock
                                                           Compensation Plan of
                                                           1993.
Board composition/qualifications
Number of board            11                              18                          18                           3
members
                           (9 Governors plus the
                           PMG and DPMG)




                                                 Page 42                   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                               Appendix IV
                                               Selected Characteristics of the Postal
                                               Service’s Board of Governors and Other
                                               Boards




RTB                    FDIC                    AMTRAK                 CPB                       Canada Post             Australia Post
Board members          $123,100 for Chair      Board members          $150 a day while          $437 (U.S. dollars)     Directors—$27,650
from the general                               receive $300 per       attending meetings        for physical            (U.S. dollars)
public and elected     $115,700 for other      diem for attending     or while engaged in       attendance at board
members receive        board members           board and              duties related to         or board committee      Deputy
$100 each day (or                              committee meetings     such meetings or          meetings.               Chair—$37,750
part thereof) for up   Board service is full   or conducting other    other activities of the                           (U.S. dollars)
to 50 days per year,   time; therefore, no     official business of   board, including          The $437 (U.S.
spent in the           daily meeting           the Corporation.       travel time.              dollars) is also      Chair—$58,700
performance of their   attendance fees                                                          payable for each full (U.S. dollars)
official duties.       paid.                   The $300 per diem      No board member           day of travel to and
                                               is a fixed statutory   shall receive             from the meeting.     No daily meeting
Federal employees                              compensation level     compensation of                                 attendance fees
appointed to the                               that has been in       more than $10,000         Board members are paid.
Board receive no                               place since the        in any fiscal year.       paid an annual
additional                                     board was created.                               retainer ($4,080 to
compensation for                                                                                $5,100 U.S. dollars)
serving on the                                                                                  that is set by
Board.                                                                                          Order-in-Council
                                                                                                (i.e., by Her
                                                                                                Majesty’s
                                                                                                Government) on the
                                                                                                recommendation of
                                                                                                the responsible
                                                                                                Minister.




13                     5                       9                      9                         11                      Up to 9 Directors.

                                                                      (6 current members        (9 Directors plus the
                                                                      and 3 vacancies).         Chair and President).
                                                                                                                                   (continued)




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                                          Appendix IV
                                          Selected Characteristics of the Postal
                                          Service’s Board of Governors and Other
                                          Boards




Organization the board
directs                  USPS                       Fannie Mae              Freddie Mac                TVA
How board members are 9 Governors appointed         13 members elected by   5 appointed by the         Appointed by the
selected              by the President of the       shareholders.           President of the United    President of the United
                      United States, by and                                 States.                    States with the advice
                      with the consent of the       5 members appointed by                             and consent of the
                      Senate.                       President of the United 13 elected by voting       Senate.
                                                    States.                 common stockholders.
                         Governors appoint PMG.

                         Governors and PMG
                         appoint DPMG.




                                          Page 44                 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                             Appendix IV
                                             Selected Characteristics of the Postal
                                             Service’s Board of Governors and Other
                                             Boards




RTB                    FDIC                  AMTRAK                  CPB                  Canada Post            Australia Post
7 appointed by the     3 appointed by the    3 members are           Appointed by the     9 Directors are        Directors are
President of the       President of the      appointed by            President of the     appointed by the       appointed by the
United States (5 of    United States, by     President of the        United States with   Minister with the      Governor-General
whom shall be          and with the advice   United States and       the advice and       approval of the        on the nomination of
officers or            and consent of the    confirmed by the        consent of Senate.   Governor in Council.   the Minister for
employees of the       Senate.               Senate                                       The Governor in        Communications
Department of                                (representing labor,                         Council appoints the   and the Arts.
Agriculture and not    1 member shall be     state governors, and                         Chair and
officers or            the Comptroller of    business).                                   President/CEO .        The Managing
employees of the       the Currency.                                                                             Director is
Rural Utilities                               2 members                                                          appointed by the
Services, and 2 of     1 shall be the         represent commuter                                                 Board of Directors.
whom shall be from     Director of the Office authorities and are
the general public     of Thrift Supervision. selected by the                                                    The Minister must
and not officers or                           President from lists                                               consult with the
employees of the                              drawn up by those                                                  Chair of Post prior to
federal government).                          authorities.                                                       appointing
                                                                                                                 Directors, and one
3 elected by                                 2 are selected by                                                   Director must be
stockholders of                              the Corporation’s                                                   recognized as
eligible cooperative                         preferred                                                           having an
borrowers.                                   stockholder— the                                                    appropriate
                                             Department of                                                       understanding of the
3 elected by                                 Transportation.                                                     interests of
stockholders of                                                                                                  employees.
eligible commercial                          The Secretary of
borrowers.                                   Transportation and
                                             Amtrak President
                                             serve by virtue of
                                             their offices.
                                                                                                                            (continued)




                                             Page 45                 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                           Appendix IV
                                           Selected Characteristics of the Postal
                                           Service’s Board of Governors and Other
                                           Boards




Organization the board
directs                  USPS                        Fannie Mae             Freddie Mac                TVA
Number of years          9 years for the 9        1 year                    1 year                     9 year fixed terms are
members are to serve     Governors. A Governor                                                         staggered so that one
                         may continue to serve up                                                      begins every 3 years on
                         to 1 year after term                                                          May 18 (e.g., 1990,
                         expires while awaiting a                                                      1993, and 1996).
                         successor to be named.

                         PMG serves at pleasure
                         of Governors.

                         DPMG serves at
                         pleasure of Governors
                         and PMG.




                                           Page 46                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                              Appendix IV
                                              Selected Characteristics of the Postal
                                              Service’s Board of Governors and Other
                                              Boards




RTB                  FDIC                     AMTRAK                  CPB                     Canada Post            Australia Post
At pleasure of the   6 years for each         3 members               The term of office of   Not to exceed 3        Up to 5 years for
President of the     appointed member,        appointed by the        each member of the      years for Directors.   Directors as
United States for    but they may             President of the        board appointed by                             specified in the
appointed members.   continue to serve        United States and       the President of the    As determined by       instrument of
                     after the expiration     confirmed by the        United States shall     Governor in Council    appointment.
2-year terms for     of their terms of        Senate                  be:                     for Chair and
elected members.     office until a           (representing labor,                            President/CEO.
                     successor has been       state governors, and    6 years, except as
                     appointed and            business) serve for     provided in section
                     qualified.               4 years.                5(c) of the Public
                                                                      Telecommunications
                     Others serve during      2 members               Act of 1992.
                     their terms as           representing
                     Comptroller of           commuter             Any member whose
                     Currency and             authorities serve forterm has expired
                     Director of the Office   2 years.             may serve until such
                     of Thrift Supervision.                        member’s
                                              2 members selected successor has taken
                                              by the Corporation’s office, or until the
                                              preferred            end of the calendar
                                              stockholder, the     year in which such
                                              Department of        member’s term has
                                              Transportation,      expired, whichever
                                              serve for 1 year.    is earlier.

                                              2 ex officio            Any member
                                              members (the            appointed to fill a
                                              Secretary of            vacancy occurring
                                              Transportation and      prior to the
                                              the President of        expiration of the
                                              AMTRAK) serve as        term for which such
                                              members as long as      member’s
                                              they remain in their    predecessor was
                                              positions as            appointed shall be
                                              Secretary of            appointed for the
                                              Transportation and      remainder of such
                                              President of            term.
                                              AMTRAK.
                                                                                                                                (continued)




                                              Page 47                 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                                 Appendix IV
                                                 Selected Characteristics of the Postal
                                                 Service’s Board of Governors and Other
                                                 Boards




Organization the board
directs                     USPS                           Fannie Mae              Freddie Mac                TVA
Board member                Qualifications are not     Of 5 presidentially         At least:                  Each member must be a
qualifications and          prescribed in legislation. appointed members, at                                  U.S. citizen and profess
restrictions as stated in                              least:                      1 from home-building       a belief in the feasibility
legislation                 No restrictions in                                     industry;                  and wisdom of the TVA
                            legislation regarding who 1 must be from                                          Act of 1933.
                            can be PMG and DPMG. mortgage lending                  1 from mortgage lending
                                                       industry;                   industry;                 Members are prohibited
                            No political                                                                     from having a financial
                            recommendations may        1 from homebuilding         1 from real estate        interest in any public
                            be considered when         industry;                   industry; and             utility corporation
                            selecting PMG and                                                                engaged in the business
                            DPMG.                      1 from real                 1 from an organization    of distributing and selling
                                                       estate industry; and        that has represented      power to the public or in
                            Governors are chosen to                                consumer interests for    any corporation
                            represent the public       1 from an organization      not less than 2 years, or engaged in the
                            interest generally and     that represents             1 person who has          manufacture, selling, or
                            cannot be                  consumer interests for      demonstrated a career     distribution of fixed
                            representatives of         not less than 2 years, or   commitment to the         nitrogen or fertilizer, or
                            specific interests using   1 person who has            provision of housing for  any ingredients thereof;
                            the USPS.                  demonstrated a career       low-income households. nor shall any member
                                                       commitment to the                                     have any interest in any
                            Not more than 5 of the     provision of housing for                              business that may be
                            Governors can be           low-income households.                                adversely affected by
                            members of the same                                                              the success of the
                            political party.                                                                 corporation as producer
                                                                                                             of concentrated
                            No officer or employee of                                                        fertilizers or as a
                            the United States may                                                            producer of electric
                            serve concurrently as a                                                          power.
                            Governor.
                                                                                                              Also, board members
                            A Governor may hold                                                               are prohibited, during
                            any other office or                                                               their tenure in office,
                            employment not                                                                    from engaging in any
                            inconsistent or in conflict                                                       other business.
                            with his duties,
                            responsibilities, and
                            powers as an officer of
                            the USPS.




                                                 Page 48                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                                  Appendix IV
                                                  Selected Characteristics of the Postal
                                                  Service’s Board of Governors and Other
                                                  Boards




RTB                       FDIC                    AMTRAK                CPB                   Canada Post           Australia Post
5 members                 Appointed board         Directors must be     No more than 6 of     None specified.       The board must
appointed by the          members must be         U.S. citizens.        the appointed                               have a mix of skills
President of the          U.S. citizens, and                            members may be                              appropriate for the
United States must        not more than 3 of      Secretary of          from the same                               Corporation. One
be officers or            the members may         Transportation        political party.                            member is to have
employees of the          be members of the       serves as Board                                                   an appropriate
Department of             same political party.   member by virtue of  The 9 appointed                              understanding of the
Agriculture and not                               his office.          members shall be                             interests of
officers or                                                            selected from such                           employees.
employees of the                                  Amtrak’s President   fields as education,
Rural Utilities                                   serves as the        cultural and civic
Services.                                         Chairman of the      affairs, or the
                                                  board by virtue of   arts—including
2 members                                         his office.          radio and
appointed by the                                                       television—and
President of the                                  3 members are        represent various
United States must                                appointed by the     regions of the
be from the general                               President of the     nation, professions,
public and not                                    United States and    and occupations,
officers or                                       confirmed by the     and represent
employees of the                                  Senate               various kinds of
federal government.                               (representing labor, talent and
                                                  state governors, and experience
3 members must be                                 business).           appropriate to the
elected from                                                           function and
cooperative-type                                  2 members            responsibilities of
organizations.                                    represent commuter CPB.
                                                  authorities and are
3 members must be                                 selected by the      Of these appointed
elected from                                      President of the     members, 1 shall be
commercial-type                                   United States from   selected from
organizations.                                    lists drawn up by    among individuals
                                                  those authorities.   who represent the
                                                                       licensees and
Elected board                                     2 members are        permittees of public
members must be                                   selected by the      television stations,
officials (managers,                              Corporation’s        and 1 shall
directors, etc.) of the                           preferred            represent the
organization they                                 stockholder.         licensees and
represent.                                                             permittees of public
                                                                       radio stations.

                                                                                                                              (continued)




                                                  Page 49                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                                Appendix IV
                                                Selected Characteristics of the Postal
                                                Service’s Board of Governors and Other
                                                Boards




Organization the board
directs                     USPS                          Fannie Mae                 Freddie Mac                TVA
Are there restrictions on   Nothing specified in          A director should not be   No, but                    None.
the number of terms a       statute or regulation.        renominated after having   stockholder-elected
member can serve?                                         served for 10 years or     directors must retire at
                                                          longer, although           age 72.
                                                          nominating committee
                                                          may for good reason
                                                          propose the
                                                          renomination of such a
                                                          director. No director
                                                          should be proposed for
                                                          renomination after 15
                                                          years of Board service.
Is board referred to as     Board of Governors.           Board of Directors.        Board of Directors.        Board of Directors.
“Board of Directors,”
“Board of Governors” or
by another title?
How is Chair selected?      Elected by the                Elected by Board.          By annual vote of the      Designated by the
                            Governors from among                                     Board of Directors.        President of the United
                            the members of the                                                                  States.
                            Board.




                                                Page 50                  GAO/GGD-97-141 Issues Related to Governance of the Postal Service
                                            Appendix IV
                                            Selected Characteristics of the Postal
                                            Service’s Board of Governors and Other
                                            Boards




RTB                   FDIC                  AMTRAK                 CPB                    Canada Post           Australia Post
No.                   There are no          None.                  Yes. No member of      No. Law states that   None specified in
                      restrictions                                 the board shall be     a Director may, on    enabling legislation.
                      contained in the                             eligible to serve in   the expiration of     Directors have been
                      statute.                                     excess of 2            his/her term of       reappointed.
                                                                   consecutive full       office, be
                                                                   terms.                 reappointed to the
                                                                                          board.




Board of Directors.   Board of Directors.   Board of Directors.    Board of Directors.    Board of Directors.   Board of Directors.



Elected by Board      One of the             President serves as   Members of the        The chair is           Chair is selected by
members.              appointed members Chair.                     board annually elect appointed by the        the Minister, with
                      shall be designated                          one of their          Governor in Council.   appointment made
                      by the President of                          members to be                                by Governor
                      the United States,                           Chair and elect one                          General.
                      by and with the                              or more of their
                      advice and consent                           members as a Vice
                      of the Senate, to                            Chair or Vice Chairs.
                      serve as Chair of the
                      Board of Directors
                      for a term of 5 years.




                                            Page 51                GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix IV
Selected Characteristics of the Postal
Service’s Board of Governors and Other
Boards




Note: Data displayed in this appendix were obtained primarily from the matrices completed by
the boards of organizations included in our study. After receiving the completed matrices, we
contacted each organization for clarification of some of their responses. We did not
independently verify the information provided.
a
 Until privatization (privatization will occur when 51 percent of the class A stock issued to the
United States and outstanding at any time after September 30, 1995, has been fully redeemed
and retired).
b
 The Australian Postal Corporation came into existence on January 1, 1989. It succeeded the
Australian Postal Commission. The legal status and identity of the Corporation did not change its
present form until the Australian Postal Corporation Act came into effect on July 1, 1989.
c
 Section 212 of the Federal Power Act, 18 U.S.C., authorizes the Federal Energy Regulatory
Commission to review and approve rates for the transmission of electric power in connection with
transmission services rendered pursuant to a Federal Energy Regulatory Commission order under
section 211 of the Federal Power Act.
d
 Some organizations provided data on pay and benefits, and others provided information only on
pay.
e
 The PMG, in commenting on a draft of this report, provided additional information on CEO pay at
nine foreign postal administrations, including Canada Post and Australia Post. See appendix V for
additional information. We did not independently verify the information provided.
f
 This plan also permits Directors to receive shares of the corporation’s common stock in lieu of
any portion of cash compensation.

Sources: Boards of the respective organizations.




Page 52                    GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix V

Comments From the U.S. Postal Service




              Page 53   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix V
Comments From the U.S. Postal Service




Page 54               GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix VI

Comments From the U.S. Postal Service
Board of Governors




              Page 55   GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix VII

Major Contributors to This Report


                     Michael E. Motley, Associate Director
General Government   Teresa L. Anderson, Assistant Director
Division             Arnel P. Cortez, Evaluator
                     Martin de Alteriis, Senior Social Science Analyst
                     Roger L. Lively, Senior Evaluator
                     Charles F. Wicker, Senior Evaluator


                     Jill P. Sayre, Senior Attorney
Office of General
Counsel




(240215)             Page 56             GAO/GGD-97-141 Issues Related to Governance of the Postal Service
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