Board of Governors Key to USPS' Future
But while we wait, the nomination does give us an opportunity to reflect on the role of the board of governors and its membership. And the timing of the reflection is particularly appropriate because, including Fineman's seat, fully one-third of the current, presidentially appointed, nine-member board is serving terms that will expire within two years.
The board of governors was established as part of the postal reorganization act of 1970. That act gave the governors powers similar to those of a board of directors of a publicly owned corporation. The governors, for example, have the power to hire the postmaster general and deputy general, enact new postal rates and direct and control postal expenditures. In other words, the governors control the future of the postal service.
We may have a new member of the board soon. His name is Alan C. Kessler, an attorney from Pennsylvania. He was nominated to fill the seat formerly held by Sam Winters, an attorney from Texas. Winters' term of nine years expired in December.
It's hard to generalize about the current board members, but let me try. Because the members are nominated by the president and subject to confirmation by the Senate, they often have some political background. Indeed, the current board has a former Tennessee governor, a former assistant secretary of education, a past chairman of the California Board of Regents and a former member of an advisory committee to the secretary of commerce. Several of the members have been or are involved in commercial enterprises. In general, those business enterprises are not household names. The Senate confirmation process requires in-depth background checks.
However, since the governors are entrusted by law with the responsibility to direct and control the postal service today and into the future, key questions are: What should be the background of the board of governors? Is the current "political process" conducive to providing governors with that background? And are the governors' responsibilities likely to change if postal reform legislation being considered were to be enacted. This last question we can answer now. H.R. 22, the reform legislation authored by Rep. John McHugh, R-NY, maintains the power of the governors. In fact, one could argue that H.R. 22 gives the governors more control over the destiny of the postal service.
The board has shown the ability to exert strong leadership and take decisive action. The decision to bring back John Nolan from outside the postal service as deputy postmaster general was only the most recent example.
But let's get back to the questions. First, what should be the background and experience of the governors? Some have said the governors should have a background in the mailing industry. Others have said that experience in organizations with very large unionized work forces would be valuable. My suggestion would be, as a starting point, to take a look at postal service competitors FedEx and UPS and understand the composition of their boards.
Technology and the role of e-commerce in the postal service's future has been a point emphasized by Postmaster General William J. Henderson. The proper use of technology can help the postal service reduce its labor costs and catch up with the productivity gains we've seen in private industry. Regarding the service's role in e-commerce, a contract has just been signed with CheckFree to help the USPS play a role in Internet bill payment. Similar opportunities to use technology for cost control, improved service and e-commerce are available for FedEx and UPS.
Faced with the technology issue, both FedEx and UPS have put several high-level technology managers on their boards. On the FedEx board we find Jim Barksdale, the former CEO of Netscape Communications Corp., and Judith Estrin, senior vice president and chief technology officer of Cisco Systems Inc. The technology manager on the UPS board is Ann Livermore. She is a corporate vice president of Hewlett-Packard, president of its Enterprise and Commercial Business Division, and was rumored to be on the short list to be CEO of Hewlett-Packard.
Clearly, postal reform is an important issue for the postal service, the mailing industry and postal competitors. Reform legislation, if it is to be enacted, will wind a rather circuitous route through Congress. Therefore, it's interesting to note that former Senate Majority Leader George Mitchell is on FedEx's board. Presumably he'll be able to provide valuable council to FedEx if postal legislation should begin to move.
It has been suggested by some that the best and most expedient postal reform solution would be to privatize the postal service. Maybe this is a lame-brain idea, maybe it makes sense. Faced with questions concerning corporate structure, investments, and raising capital, both FedEx and UPS could turn to those with investment banking experience on their boards for advice.
So we can conclude that postal competitors are putting on their boards individuals with backgrounds that can provide strategic review and advice to their CEOs on current contemporary issues.
The second question raised was, can the political process provide governors with backgrounds that can assist senior management with strategic decisions?
You will recall that when the postal service filed R 2000, the current rate case, two of the industry's largest trade associations announced their displeasure. The Direct Marketing Association's board registered a vote of no confidence in the postal service. The Magazine Publishers of America announced a three-year campaign to both fight R 2000, which would raise magazine rates an average of 15 percent, and to "aggressively pursue much-needed reform of the postal system."
It seems that all the trade associations that care about an efficient and effective postal service, particularly as it begins to feel the effects of e commerce, must influence the selection of governors. In the near term, no other action can have a bigger impact on the postal service.
Since there will be three openings on the board of governors within the next two years, I would recommend that trade associations develop a list of qualified candidates who would be willing to serve and begin a major effort to let the Senate and the White House know how important to the future of the postal service these next three governor appointments will be. I believe their actions can succeed.