Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance 7. Administering the Railways of highly skilled potential candidates—particularly with private sector and international expertise and experience. Incorporating international experts into the Board is a good idea (although rarely followed), when the country involved lacks experience or expertise in the railway domain. A good example of this approach is the Board of the railway infrastructure manager in Great Britain (currently Network Rail, former Railtrack), which included foreign experts. Board members must be professional, independent of political influence, and act in the sole interest of the railway, rather than represent interests of any other constituencies. To this end, the supervisory entity should develop guidelines or a code of ethics for its own members and board appointees, including state officials. Any potential conflicts of interest should be carefully evaluated and relevant trading regulations should be adhered to for those who have any personal financial stake in the railway, suppliers, or customers. Board members should have a clear mandate and full responsibility for company performance, and must be fully accountable to the owner(s) for their actions. 7.4.3 Appointing the CEO The CEO must be nominated and appointed against professional criteria using transparent rules and procedures that maintain a line of accountability from the CEO to the board and the ownership entity. Appointing and dismissing the CEO is a key board function and responsibility. Without authority over the CEO, boards would be unable to fully exercise their monitoring function or take responsibility for state-owned railway performance. Sometimes, the board consults with the ownership entity to select the CEO, or the CEO is appointed directly by ownership entity decision, in which case it is highly recommended to consult the board to preserve its authority. Since the board must assess management performance, it should decisively influence CEO compensation, which should be tied to CEO performance, and publicly disclosed. 7.4.4 Separating the board chairman from the CEO A well-functioning board should be structured to facilitate objective and independent judgments, accurate monitoring of senior management, and strategic decision making. To enhance board independence, the OECD Principles of Corporate Governance consider it good practice to separate the chair from the CEO if the state-owned railway is organized in a single board structure, “achieving an appropriate balance of power, increasing accountability and improving the board’s capacity for decision making independent of management.” Implementing this principle requires clearly defined board and chair functions to prevent conflicts with company management 71 . 71 For example, the President and CEO of Amtrak, the most important passenger transport company in the USA, is by law NOT Chairman of the Board. The World Bank Page 116
Railway Reform: Toolkit for Improving Rail Sector Performance 7. Administering the Railways Separating the board chair from the CEO is fundamental to an efficiently functioning state-owned railway board, and to empowering board independence from management. The chair could guide board members, assign individual responsibilities from among strategic board responsibilities, and seek agreement with the ownership entity on solutions for improving board efficiency. The World Bank Page 117
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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