ISLAMABAD: As part of governance reforms required under the International Monetary Fund (IMF) programme, the government has tightened rules governing the appointment, induction and performance evaluation of boards of directors of state-owned enterprises (SOEs), whose combined liabilities exceed Rs9 trillion.

The Ministry of Finance on Thursday issued updated “Directors Appointment and Evaluation Guidelines” to all ministries, divisions and SOEs to ensure transparent and effective appointment, induction and evaluation of boards under the State-Owned Enterprises (Governance and Operations) Act 2023.

The guidelines provide a detailed framework for board appointments, induction of directors, functioning of Board Nominations Committees (BNCs), performance evaluation and disclosure of conflicts of interest.

The new framework will primarily apply to independent directors, while the government will continue to nominate public officials to ex-officio positions on SOE boards.

Independent directors to be selected through nominations committees

Under the guidelines, SOE boards will be required to immediately notify the government of vacancies involving independent directors.

In case of a vacancy, the board will submit recommendations to the BNC outlining the knowledge, skills and experience already available on the board and those required in a new member.

Where a board’s tenure is nearing completion, it will be required to submit a comprehensive report and recommendations at least three months in advance.

The report will assess the board’s overall performance against objectives set at the beginning of its tenure, strategic policies adopted to achieve those targets and any failures along with their reasons.

It will also include a comparative analysis of the SOE’s financial and non-financial performance at the beginning and end of the board’s tenure, evaluation of individual directors and identification of gaps in the board’s skill set.

The SOEs Act, 2023, provides that BNCs will identify and recommend candidates to the federal government for appointment as independent directors. They will also recommend ex-officio positions to be filled by relevant federal or provincial government divisions and public-sector organisations.

For this purpose, ministries and divisions will be required to prepare working papers for BNC members at least three days before meetings.

These papers will include a brief on the SOE’s performance and details of proposed candidates, with at least three candidates to be considered for each vacant position. The candidates must possess experience and skills relevant to the nature and scope of the SOE concerned.

If an SOE board fails to provide timely recommendations on the required competencies, the BNC will conduct its own assessment of the skills needed.

BNC recommendations will be submitted to the federal government at least one month before the expiry of an existing director’s tenure, or as soon as a vacancy arises.

Following approval by the federal cabinet, the relevant ministry will notify the appointment and the SOE will publish it on its official website.

Directors who have not already completed a directors’ training programme will be required to do so within three months of appointment, while SOE managements will also arrange orientation for newly appointed board members.

Conflict of interest

The guidelines also strengthen conflict-of-interest requirements under the Companies Act, 2017, the SOEs Act and the SOE Policy.

Each SOE will be required to maintain a register of interests under a standard template provided by the finance ministry.

Directors with a conflict of interest will have to abstain from discussions and voting on the relevant matter, while their presence will not count towards quorum for that agenda item.

The BNCs will also be responsible for evaluating the performance of ex-officio and independent directors and may adopt an appropriate methodology for assessing both individual directors and the board as a whole.

Evaluations will be mandatory annually, at the end of a board’s tenure and at the time of resignation of a director.

BNC-approved evaluations will be shared by the relevant ministry or division with the Ministry of Finance’s Central Monitoring Unit for maintaining a central database of directors.

Published in Dawn, August 21st, 2026