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

GAO United States

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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Background The Postal Service is a corporation-like organization that was created by

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.

Results in Brief A majority of current and former members of the Postal Service Board of

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.

Scope and

Methodology

To identify current and former members’ areas of concern, including

specific issues and their suggested legislative changes, we (1) interviewed

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).

10A 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.

Areas Where a

Majority of

Interviewees Believed

Legislative Attention

Is Needed

A majority of the current and former members of the Postal Service Board

of Governors whom we interviewed believed legislative attention may be

warranted in three areas—the Board’s authority, Board members’

compensation, and Board members’ qualifications. Although there was no

consensus among the members on the specific issues within each area of

concern, several issues were mentioned frequently, and a number of

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

Establish Postage Rates

The issue most frequently cited by current and former Postal Service

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

11The 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.

12Monopoly 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.

13Generally, the terms “noncompetitive mail” and “competitive mail” are synonymous with “monopoly

mail” and “nonmonopoly mail.”

14The 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

PMG

The second most frequently cited issue was the Board’s inability to pay the

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.

15By 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

16The 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).

17Canada 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).

18The 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

19See http://aflcio.paywatch.org

20The 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

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

corporations.

Page 14 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
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

for Board Membership

The final issue cited by a majority of current and former members as

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
B-272702 

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

22Donald 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.

Areas Where Some,

but Less Than a

Majority of,

Interviewees Believed

Legislative Attention

Is Needed

In our discussions with current and former members of the Postal Service

Board of Governors, we also identified areas where some, but less than a

majority of, interviewees believed legislative attention is needed. Those

areas were (1) the Board’s mission and responsibilities, (2) the Board’s

relationship with postal management, (3) the Board’s accountability and

performance measures, and (4) the Board’s composition and structure.

Additionally, our review of pertinent literature indicated that others have

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.

23See S. Prt. 104-18, April 1995.

24Clyde Linsley, “Government Inc.,” Government Executive (Feb. 1995).

Page 17 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
B-272702 

Board Mission and

Responsibilities

Six interviewees cited the Board’s mission and responsibilities as an area

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

25Seven 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.

26Clyde 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

Postal Management

Five interviewees cited the Board’s relationship with 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

Performance Measures

Six interviewees cited Board accountability and performance measures as

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
B-272702 

• 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

Structure

Four interviewees cited Board composition and structure as an area

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.

27Five 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.

Page 20 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
B-272702 

Areas Where None of

the Interviewees

Believed Legislative

Attention Is Needed

There were two areas discussed where none of the current or former

Board members interviewed believed legislative attention is needed. These

areas were (1) Board staffing and (2) the Board’s legal status.

All of the interviewees agreed that Board staffing was an internal

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.

Agency Comments The PMG and the Chairman of the Postal Service Board of Governors

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

Page 21 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
B-272702 

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 

Descriptions of

Various

Government-Created

Organizations

26

Appendix II 

Current and Former

Postal Service Board

Members Interviewed

28

Appendix III 

Interview Guide

29

Appendix IV 

Selected

Characteristics of the

Postal Service’s Board

of Governors and

Other Boards

32

Appendix V 

Comments From the

U.S. Postal Service

53

Appendix VI 

Comments From the

U.S. Postal Service

Board of Governors

55

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

Appendix VII 

Major Contributors to

This Report

56

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.

28See 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

Former Board Chair

January 1969

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

Relationship Between

PMG and Board

1. Are you satisfied with the statutory relationship between the PMG and

the Board? If not, why? Should anything be changed in law/regulation?

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.

Board’s Relationship

to PRC

1. Are you satisfied with the Board’s statutory relationship with PRC? If not,

why? Should anything be changed in law/regulation?

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?

Board’s Mission and

Responsibilities

1. How does the Board get involved in setting goals and developing

implementation strategies for the Postal Service?

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.

Board’s Authority 1. Are there any statutory authorities the Board does not have that you

believe it should have? If so, please explain.

2. Are there any statutory authorities the Board has that need to be

expanded or contracted?

Board’s Legal Status 1. Is the Board’s legal status satisfactory, or are legislative changes

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

Board’s

Accountability and

Performance

Measures

1. Do you believe there are Board accountability issues that need to be

addressed with regard to the Board as a collective unit? If so, what are

those issues?

2. To whom are individual Board members accountable?

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?

Board’s Compensation 1. Is the new pay level adequate? If not, please explain why.

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?

Board’s Composition/

Qualifications

1. Do the current size and composition of the Board allow the Board to

effectively perform its duties?

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

Board Staff 1. Do you believe that the Board has sufficient staff resources? If not, what

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

establishment of the

executive branch of the

United States

government

Government-sponsored

enterprise

Government-sponsored

enterprise

Wholly-owned

government corporation

Legal authority Postal Reorganization

Act of 1970 and

amendments 

[39 U.S.C.]

Federal National

Mortgage Association

Charter Act, as amended 

[12 U.S.C. 1716-1723d]

Federal Home Loan

Mortgage Corporation

Act, as amended 

[12 U.S.C. 1451-1459]

Tennessee Valley

Authority Act of 1933

and amendments 

[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

government

corporationa

Mixedownership

government

corporation

Mixedownership

government

corporation

Private, nonprofit

corporation

organized under

D.C. law

“Parent Crown

Corporation” (fully

owned by the Crown)

Federal government

business enterprise

(fully owned by the

Commonwealth

Government of

Australia)

7 U.S.C. 941-950b 12 U.S.C.

1811-1835a

49 U.S.C. 240101 et

seq.

47 U.S.C. 396 et al. Canada Post

Corporation (CPC)

Act 1980 and

amendments 

[CPCA

1980-81-82-83, c.54

and amendments]

Australia Postal

Corporation Act of

1989 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/

purpose

To provide postal

services to bind the

nation through the

personal, educational,

literary, and business

correspondence of the

people; and to provide

prompt, reliable, and

efficient service to

patrons in all areas and

to render postal services

to all communities.

To provide stability in the

secondary market for

residential mortgages;

respond appropriately to

the private capital

market; provide ongoing

assistance to the

secondary market for

residential mortgages

(including activities

relating to mortgages on

housing for low- and

moderate-income

families involving a

reasonable economic

return that may be less

than the return earned

on other activities) by

increasing the liquidity of

mortgage investments

and improving the

distribution of investment

capital available for

residential mortgage

financing; and promote

access to mortgage

credit throughout the

nation (including central

cities, rural areas, and

underserved areas) by

increasing the liquidity of

mortgage investments

and improving the

distribution of investment

capital available for

residential mortgage

financing.

To provide stability in the

secondary market for

residential mortgages;

respond appropriately to

the private capital

market; provide ongoing

assistance to the

secondary market for

residential mortgages

(including activities

relating to mortgages on

housing for low- and

moderate-income

families involving a

reasonable economic

return that may be less

than the return earned

on other activities) by

increasing the liquidity of

mortgage investments

and improving the

distribution of investment

capital available for

residential mortgage

financing; and promote

access to mortgage

credit throughout the

nation (including central

cities, rural areas, and

underserved areas) by

increasing the liquidity of

mortgage investments

and improving the

distribution of investment

capital available for

residential mortgage

financing.

To improve the

navigability of the

Tennessee River;

provide for flood control,

reforestation, the proper

use of marginal lands,

and the agricultural and

industrial development of

the Tennessee Valley;

provide for the national

defense; and provide an

ample supply of electric

power to seven-state

region in the

southeastern United

States.

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

adequate supply of

supplemental funds,

to the extent

feasible, from

nonfederal sources

to (1) make loans to

corporations and

public bodies for the

purpose of financing

or refinancing the

construction,

improvement,

expansion,

acquisition, and

operation of

telephone lines,

facilities, and

systems; and (2)

conduct its

operations, to the

extent practicable,

on a self-sustaining

basis.

To insure deposits

of banks and

savings associations.

To provide intercity

and commuter rail

passenger

transportation in the

United States.

To facilitate the full

development of

public

telecommunications.

To establish and

operate a postal

service for the

collection,

transmission, and

delivery of

messages,

information, funds,

and goods both

within Canada and

between Canada

and places outside

Canada;

manufacture and

provide such

products and to

provide such

services as are, in

the opinion of the

Corporation,

necessary or

incidental to the

postal service

provided by the

Corporation; and

provide to or on

behalf of

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.

To supply postal

services within

Australia and

between Australia

and places outside

Australia. Australia

Post is also able to

carry on any

business or activity,

either in Australia or

overseas, relating to

the supply of postal

service.

Australia Post may

also carry on any

business or activity

that is conveniently

carried on by use of

resources not

immediately

required in

performing the

principal function or

in the course of

performing the

principal function.

(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

authority to set prices,

rates, etc.

Postal rates are

determined in

conjunction with a Postal

Rate Commission (PRC)

recommendation. The

Governors may approve

a PRC-recommended

change; accept

recommended change

under protest; reject or,

in limited circumstances,

modify recommended

change.

PRC is an independent

agency that acts upon

requests from the USPS

or in response to

complaints filed by

interested parties.

Among its major

responsibilities are to

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.

The Board has unilateral

authority to conduct

business operations, but

generally day-to-day

business activities are

delegated to

management subject to

provisions of charter.

Freddie Mac’s charter

explicitly provides that

Freddie Mac has full

discretion in setting

prices and other

business operations. 

There are no regulatory

or other external limits on

the authority of Freddie

Mac’s management to

set prices for mortgages

it purchases and the

securities it issues. 

TVA’s board has

exclusive authority to set

prices, rates, etc., for the

products or services that

TVA sells. 

The TVA act contains

standards for

determining appropriate

levels for TVA’s electric

power rates but commits

the fixing of those rates

to the discretion of the

TVA board and

precludes judicial review

thereof. 

With one exception, no

statutory provision

authorizes another

person, board, or

commission to set or

review prices.c

Does board set pay for

CEO?

Yes, Governors set pay

of the PMG, subject to

limitations of 39 U.S.C.

1003(a); i.e., salary

cannot exceed the rate

for Level I of the

Executive Schedule.

Yes, the Board is

authorized to fix

compensation for the

officers of the

Corporation.

Yes, the Board of

Directors determines

compensation of officers.

Yes, the board sets

compensation for all TVA

employees. Salary for

regular employees may

not exceed that received

by board members.

Does board set benefits

for CEO?

Yes, subject to

restrictions of Federal

Retirement and Workers

Compensation Laws.

Yes, the Board is

authorized to fix

compensation for

officers of the

Corporation.

Yes, the Board of

Directors determines

benefits of officers.

Yes, the board sets

compensation, including

benefits, for all

appointees.

Page 36 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

The only product of

RTB is loans. Loans

are to be made in

accordance with the

requirements

contained in the

Rural Electrification

Act, Section 408(a).

Interest rates are

determined by a

formula set by law in

the Act, Section

408(b). 

The U.S.

Department of

Agriculture Rural

Utilities Service is

responsible for the

day-to-day

operation of RTB,

and Congress

maintains regulatory

authority.

The board has

unilateral authority to

grant or deny

deposit insurance to

financial institutions.

Board decisions are

not subject to

approval by another

regulatory authority.

The board has

unilateral authority to

set prices, rates,

etc., without review

or approval by an

independent

regulatory authority.

The board has the

authority to approve

prices; however, it

has no products to

sell. Specifically,

CPB is not a

commodity business.

The board, directly

or indirectly through

delegation of

authority to the

President/CEO,

oversees virtually all

rate-making

decisions. The

board, in delegating

its authority, has

established that (1)

all rates established

through regulation

(i.e., noncompetitive

products) require

approval of the

board, (2) all

generic rates (rates

available to anyone

meeting specified

terms and

conditions)

established outside

of regulation require

the President/CEO’s

approval, and (3) all

sales agreements

(generic or

non-generic) are

subject to the

board’s delegation

of authority

instrument and

related processes.

The board sets

prices for all

products and

services. The board

must notify the

Minister of any

intention to alter the

price of the

standard postal rate

(the reserved

service), and the

Minister has the

opportunity to

disallow it.

The Australian

Competition and

Consumer Council,

while having no

direct authority over

the price, 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.

No. No, the pay of the

Chair of the Board

(“CEO”) is

determined by

reference to Federal

Statutes—Level III of

the Executive

Schedule.

Yes. Yes, but president

may not be

compensated at an

annual rate of pay

that exceeds the

rate of basic pay in

effect from time to

time for Level I of

the Executive

Schedule under

Sec. 5312 of Title 5.

No, the CEO’s pay is

set by Governor in

Council.

Yes.

No. Yes. Yes, under 49

U.S.C. § 24303(b).

Yes. No, benefits are set

by the Governor in

Council.

Yes.

(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

(FY95)d

$148,400 $800,000 salary;

$833,263 bonus; and

$23,102 other annual

compensation, as well as

long-term compensation

in the form of stock

awards and securities

options.

$865,000 salary;

$394,000 bonus; and

$100,688 other annual

compensation, as well as

long-term compensation

in the form of restricted

stock awards and

securities options.

Not applicable.

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

compensation is to

conform to

provisions of the

federal executive

salary schedule.

$108,200 salary and

approximately 20%

of that for benefits

for the Administrator

of Rural Utilities

Services, who

serves as the CEO

of the telephone

bank.

The Chair’s total pay

and benefits

compensation for

FY95 was

$147,014.74.

The CEO’s

compensation does

not exceed the

Federal Executive

Level I salary scale.

The CEO receives

the following

benefits: health

insurance, an

employer-paid

retirement income

plan, a 401(k)

retirement savings

plan, life and

accidental death

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.

$148,400 This is not

considered public

information.e

However, the CPC

Board contact

provided a range of

salary that is public:

$189,000 to

$233,000 (U.S.

dollars).

The benefit package

is worth about 20%

of salary.

Not publicly

available.e

Terms and

conditions are set at

a level that takes

into account both

public and private

sector

considerations. Prior

consultation with the

Remuneration

Tribunal is part of

the process of

establishing a

package.

(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

salaries and benefits for

Board members are

determined and

approved

For Governors, salary

and reimbursable

expenses determined by

statute.

Governors determine

pay of PMG and DPMG

within legislatively

established parameters.

Board advised by

outside experts on

appropriate levels of

compensation based on

payments made by

comparable businesses.

Pursuant to a resolution

adopted by the board,

the 15 outside directors

receive an annual

retainer, annual award of

stock options and

restricted stock, and

meeting attendance

fees. 

They do not receive

salaries or other

employee benefits.

Salary of TVA Board

Chair is established

under Level III of the

Executive Schedule

Salary. 

The salary of the other

two members of the TVA

board is established

under Level IV of the

Executive Schedule.

Benefits available to

board members are

those generally available

to federal employees,

including presidential

appointees, by statute.

Description of how

increases in salaries

and other benefits

occur

Governors’ salaries are

set by legislation. From

1970 to 1995, there were

no salary increases. In

1996, salaries were

increased by legislation.

PMG and DPMG salaries

are set by the

Governors, subject to a

pay cap.

Increases in pay are

done through the

legislative process.

Generally annual

adjustments.

Board is advised by

outside experts on

appropriate levels of

compensation based on

payments made by

comparable businesses.

Board members receive

cash fees and stock

awards as their

compensation.

Adjustments for inflation

are not included in the

criteria for setting

compensation. However,

from time to time Freddie

Mac reviews the

compensation package

for board members to

ensure that it remains

competitive.

The Chairman and two

directors of the TVA

board are positions

covered by level III and

level IV, respectively, of

the Executive Schedule

(5 U.S.C. §5314 and

§5315). 

Increases in pay are

done through the

legislative process.

Is member service full or

part time?

Full time for PMG and

DPMG.

Part time for Governors.

Full time for 3

management employees

and part time for

rest of board, who are

outside management

directors.

Part time. Board

members provide

service year round.

There is no fixed-hour

requirement for service.

Full time

Page 40 GAO/GGD-97-141 Issues Related to Governance of the Postal Service
Appendix IV 

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Service’s Board of Governors and Other

Boards

RTB FDIC AMTRAK CPB Canada Post Australia Post

Determined by

statute.

Salary is determined

under federal

statutes —Level III

of the Executive

Schedule for

Chairperson and

Level IV for other

members.

Pay and expenses

are set by statute.

By statute. Determined by the

Governor in Council.

Determined by an

independent central

remuneration

tribunal.

Salaries and

benefits have not

been increased

since establishment

of Board in 1971.

Adjustments would

be made

legislatively.

Board members’

salaries are set by

statute (5 U.S.C.

§5314 and §5315)

under appropriate

executive levels.

Changes would be

done legislatively.

Adjustment would

require legislative

change.

Salaries and

benefits may be

changed by an act

of Congress at any

time.

Increases are not

made on a regular

basis. They are

made following a

recommendation

from the Minister

responsible for

Canada Post to the

Governor in Council.

The last adjustment

was made by the

Governor in Council

in 1990.

The Remuneration

Tribunal regularly

examines

remuneration levels

and will consult with

the board on

specific issues.

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

board members

$30,000 plus $300 a day

for not more than 42

days of meetings per

year for Governors.

$148,400 salary for PMG

$148,000 salary for

DPMG

$23,000 retainer

annually, plus $1,000 for

attending each board or

board committee

meeting.

Committee chairs

received an additional

$500 for each committee

meeting they chaired.

Additionally, each

nonmanagement director

has restricted common

stock under the Fannie

Mae Restricted Stock

Plan for Directors and

stock options under the

Fannie Mae Stock

Compensation Plan of

1993. Fannie Mae

officers who serve on the

Board of Directors do not

receive compensation

for serving as directors

other than the

compensation they

receive as Fannie Mae

officers. Fannie Mae

officers are not eligible to

participate in the Fannie

Mae Restricted Stock

Plan for Directors and

are not eligible to receive

nonmanagement director

stock options under the

Fannie Mae Stock

Compensation Plan of

1993.

$20,000 retainer

annually, prorated based

on the quarter in which

they were appointed.

Directors also were paid

$1,000 for attendance at

each meeting of the

board or any board

committee meeting and

were reimbursed for

out-of-pocket costs of

attending such meetings.

Each board committee

chairman also received

an annual retainer of

$2,500.

Pursuant to the 1995

Directors’ Stock

Compensation Plan,f

each Director was

granted options to

purchase 2,400 shares

of the Corporation’s

common stock and

received shares of

restricted stock having a

fair market value of

approximately $10,000

on the date of the award. 

Effective January 1, 1996:

$115,700 for Board

members

$123,100 for Chairman

Board service is full time;

therefore, no daily

meeting attendance fees

paid.

Board composition/qualifications

Number of board

members

11 

(9 Governors plus the

PMG and DPMG)

18 18 3

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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

Board members

from the general

public and elected

members receive

$100 each day (or

part thereof) for up

to 50 days per year,

spent in the

performance of their

official duties.

Federal employees

appointed to the

Board receive no

additional

compensation for

serving on the

Board.

$123,100 for Chair

$115,700 for other

board members

Board service is full

time; therefore, no

daily meeting

attendance fees

paid.

Board members

receive $300 per

diem for attending

board and

committee meetings

or conducting other

official business of

the Corporation. 

The $300 per diem

is a fixed statutory

compensation level

that has been in

place since the

board was created.

$150 a day while

attending meetings

or while engaged in

duties related to

such meetings or

other activities of the

board, including

travel time.

No board member

shall receive

compensation of

more than $10,000

in any fiscal year.

$437 (U.S. dollars)

for physical

attendance at board

or board committee

meetings.

The $437 (U.S.

dollars) is also

payable for each full

day of travel to and

from the meeting. 

Board members are

paid an annual

retainer ($4,080 to

$5,100 U.S. dollars)

that is set by

Order-in-Council

(i.e., by Her

Majesty’s

Government) on the

recommendation of

the responsible

Minister.

Directors—$27,650

(U.S. dollars)

Deputy

Chair—$37,750

(U.S. dollars)

Chair—$58,700

(U.S. dollars)

No daily meeting

attendance fees

paid.

13 5 9 9 

(6 current members

and 3 vacancies).

11

(9 Directors plus the

Chair and President).

Up to 9 Directors.

(continued)

Page 43 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

How board members are

selected

9 Governors appointed

by the President of the

United States, by and

with the consent of the

Senate. 

Governors appoint PMG.

Governors and PMG

appoint DPMG.

13 members elected by

shareholders.

5 members appointed by

President of the United

States.

5 appointed by the

President of the United

States.

13 elected by voting

common stockholders.

Appointed by the

President of the United

States with the advice

and consent of the

Senate.

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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

7 appointed by the

President of the

United States (5 of

whom shall be

officers or

employees of the

Department of

Agriculture and not

officers or

employees of the

Rural Utilities

Services, and 2 of

whom shall be from

the general public

and not officers or

employees of the

federal government).

3 elected by

stockholders of

eligible cooperative

borrowers. 

3 elected by

stockholders of

eligible commercial

borrowers.

3 appointed by the

President of the

United States, by

and with the advice

and consent of the

Senate.

1 member shall be

the Comptroller of

the Currency.

1 shall be the

Director of the Office

of Thrift Supervision.

3 members are

appointed by

President of the

United States and

confirmed by the

Senate

(representing labor,

state governors, and

business).

2 members

represent commuter

authorities and are

selected by the

President from lists

drawn up by those

authorities.

2 are selected by

the Corporation’s

preferred

stockholder— the

Department of

Transportation.

The Secretary of

Transportation and

Amtrak President

serve by virtue of

their offices.

Appointed by the

President of the

United States with

the advice and

consent of Senate.

9 Directors are

appointed by the

Minister with the

approval of the

Governor in Council.

The Governor in

Council appoints the

Chair and

President/CEO .

Directors are

appointed by the

Governor-General

on the nomination of

the Minister for

Communications

and the Arts.

The Managing

Director is

appointed by the

Board of Directors.

The Minister must

consult with the

Chair of Post prior to

appointing

Directors, and one

Director must be

recognized as

having an

appropriate

understanding of the

interests of

employees.

(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

members are to serve

9 years for the 9

Governors. A Governor

may continue to serve up

to 1 year after term

expires while awaiting a

successor to be named.

PMG serves at pleasure

of Governors.

DPMG serves at

pleasure of Governors

and PMG.

1 year 1 year 9 year fixed terms are

staggered so that one

begins every 3 years on

May 18 (e.g., 1990,

1993, and 1996).

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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

At pleasure of the

President of the

United States for

appointed members.

2-year terms for

elected members.

6 years for each

appointed member,

but they may

continue to serve

after the expiration

of their terms of

office until a

successor has been

appointed and

qualified. 

Others serve during

their terms as

Comptroller of

Currency and

Director of the Office

of Thrift Supervision.

3 members

appointed by the

President of the

United States and

confirmed by the

Senate

(representing labor,

state governors, and

business) serve for

4 years.

2 members

representing

commuter

authorities serve for

2 years.

2 members selected

by the Corporation’s

preferred

stockholder, the

Department of

Transportation,

serve for 1 year.

2 ex officio

members (the

Secretary of

Transportation and

the President of

AMTRAK) serve as

members as long as

they remain in their

positions as

Secretary of

Transportation and

President of

AMTRAK.

The term of office of

each member of the

board appointed by

the President of the

United States shall

be:

6 years, except as

provided in section

5(c) of the Public

Telecommunications

Act of 1992. 

Any member whose

term has expired

may serve until such

member’s

successor has taken

office, or until the

end of the calendar

year in which such

member’s term has

expired, whichever

is earlier.

Any member

appointed to fill a

vacancy occurring

prior to the

expiration of the

term for which such

member’s

predecessor was

appointed shall be

appointed for the

remainder of such

term.

Not to exceed 3

years for Directors.

As determined by

Governor in Council

for Chair and

President/CEO.

Up to 5 years for

Directors as

specified in the

instrument of

appointment.

(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 and

restrictions as stated in

legislation

Qualifications are not

prescribed in legislation.

No restrictions in

legislation regarding who

can be PMG and DPMG.

No political

recommendations may

be considered when

selecting PMG and

DPMG.

Governors are chosen to

represent the public

interest generally and

cannot be

representatives of

specific interests using

the USPS.

Not more than 5 of the

Governors can be

members of the same

political party.

No officer or employee of

the United States may

serve concurrently as a

Governor.

A Governor may hold

any other office or

employment not

inconsistent or in conflict

with his duties,

responsibilities, and

powers as an officer of

the USPS.

Of 5 presidentially

appointed members, at

least:

1 must be from

mortgage lending

industry;

1 from homebuilding

industry;

1 from real 

estate industry; and 

1 from an organization

that represents

consumer interests for

not less than 2 years, or

1 person who has

demonstrated a career

commitment to the

provision of housing for

low-income households.

At least:

1 from home-building

industry;

1 from mortgage lending

industry;

1 from real estate

industry; and

1 from an organization

that has represented

consumer interests for

not less than 2 years, or

1 person who has

demonstrated a career

commitment to the

provision of housing for

low-income households.

Each member must be a

U.S. citizen and profess

a belief in the feasibility

and wisdom of the TVA

Act of 1933. 

Members are prohibited

from having a financial

interest in any public

utility corporation

engaged in the business

of distributing and selling

power to the public or in

any corporation

engaged in the

manufacture, selling, or

distribution of fixed

nitrogen or fertilizer, or

any ingredients thereof;

nor shall any member

have any interest in any

business that may be

adversely affected by

the success of the

corporation as producer

of concentrated

fertilizers or as a

producer of electric

power. 

Also, board members

are prohibited, during

their tenure in office,

from engaging in any

other business.

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 by the

President of the

United States must

be officers or

employees of the

Department of

Agriculture and not

officers or

employees of the

Rural Utilities

Services.

2 members

appointed by the

President of the

United States must

be from the general

public and not

officers or

employees of the

federal government.

3 members must be

elected from

cooperative-type

organizations.

3 members must be

elected from

commercial-type

organizations.

Elected board

members must be

officials (managers,

directors, etc.) of the

organization they

represent.

Appointed board

members must be

U.S. citizens, and

not more than 3 of

the members may

be members of the

same political party.

Directors must be

U.S. citizens.

Secretary of

Transportation

serves as Board

member by virtue of

his office.

Amtrak’s President

serves as the

Chairman of the

board by virtue of

his office.

3 members are

appointed by the

President of the

United States and

confirmed by the

Senate

(representing labor,

state governors, and

business).

2 members

represent commuter

authorities and are

selected by the

President of the

United States from

lists drawn up by

those authorities. 

2 members are

selected by the

Corporation’s

preferred

stockholder.

No more than 6 of

the appointed

members may be

from the same

political party.

The 9 appointed

members shall be

selected from such

fields as education,

cultural and civic

affairs, or the

arts—including

radio and

television—and

represent various

regions of the

nation, professions,

and occupations,

and represent

various kinds of

talent and

experience

appropriate to the

function and

responsibilities of

CPB.

Of these appointed

members, 1 shall be

selected from

among individuals

who represent the

licensees and

permittees of public

television stations,

and 1 shall

represent the

licensees and

permittees of public

radio stations.

None specified. The board must

have a mix of skills

appropriate for the

Corporation. One

member is to have

an appropriate

understanding of the

interests of

employees.

(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

the number of terms a

member can serve?

Nothing specified in

statute or regulation.

A director should not be

renominated after having

served for 10 years or

longer, although

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.

No, but

stockholder-elected

directors must retire at

age 72.

None.

Is board referred to as

“Board of Directors,”

“Board of Governors” or

by another title?

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

How is Chair selected? Elected by the

Governors from among

the members of the

Board.

Elected by Board. By annual vote of the

Board of Directors.

Designated by the

President of the United

States.

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

restrictions

contained in the

statute.

None. Yes. No member of

the board shall be

eligible to serve in

excess of 2

consecutive full

terms.

No. Law states that

a Director may, on

the expiration of

his/her term of

office, be

reappointed to the

board.

None specified in

enabling legislation.

Directors have been

reappointed.

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

Elected by Board

members.

One of the

appointed members

shall be designated

by the President of

the United States,

by and with the

advice and consent

of the Senate, to

serve as Chair of the

Board of Directors

for a term of 5 years.

President serves as

Chair.

Members of the

board annually elect

one of their

members to be

Chair and elect one

or more of their

members as a Vice

Chair or Vice Chairs.

The chair is

appointed by the

Governor in Council.

Chair is selected by

the Minister, with

appointment made

by Governor

General.

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.

aUntil 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).

bThe 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.

cSection 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.

dSome organizations provided data on pay and benefits, and others provided information only on

pay.

eThe 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

General Government

Division

Michael E. Motley, Associate Director

Teresa L. Anderson, Assistant Director

Arnel P. Cortez, Evaluator

Martin de Alteriis, Senior Social Science Analyst

Roger L. Lively, Senior Evaluator

Charles F. Wicker, Senior Evaluator

Office of General

Counsel

Jill P. Sayre, Senior Attorney

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