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 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. The act providing appropriations 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. 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, 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. 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. In making these selections, we used our recent report on government corporations, 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. These organizations were described in a recent Price Waterhouse report 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. We conducted our review at postal headquarters in Washington, D.C., between July 1996 and April 1997 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the PMG and the Chairman of the USPS Board of Governors. Their comments are discussed at the end of this letter and included as appendixes V and VI, respectively. A majority of the current and former members of the Postal Service Board 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. 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 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.