U.S. Postal Service: Issues Related to Governance of the Postal Service
(Letter Report, 08/14/97, GAO/GGD-97-141).

Pursuant to a congressional request, GAO obtained information on Postal
Service governance issues, focusing on: (1) 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) major characteristics of the Postal Service's
Board of Governors with the characteristics of selected boards of their
government-created corporations or corporation-like organization to
identity similarities and dissimilarities, particularly as they relate
to the major areas of concern identified by current and former Board
members; and (3) information on governance issues that might be helpful
to the House Committee on Government Reform and Oversight, Postal
Service Subcommittee as it deliberates Postal Service reform.

GAO noted that: (1) a majority of current and former members of the
Postal Service Board of Governors GAO interviewed said legislative
attention was needed in three broad areas; (2) 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; (3) the major areas of concern were the Board's
authority, Board members' compensation, and Board members'
qualifications; (4) within these broad areas of concern, the most
frequently cited issues were: (a) the limitations on the Board's
authority to establish postage rates; (b) the inability of the Board to
pay the Postmaster General more than the rate for level I of the
Executive Schedule; (c) the Board's lack of pay comparability with the
private sector; and (d) qualification requirements that are too general
to ensure that Board appointees possess the kind of experience necessary
to oversee a major government business; (5) GAO's comparison of the
Board of Governors with nine other boards of government-created
organizations showed both similarities and dissimilarities; (6)
similarities indicate that these boards were created to function much
like private-sector corporate boards; (7) dissimilarities, however,
reflect the amount of flexibility the boards were given to operate like
private sector corporations; (8) GAO also identified four broad areas
where some of the interviewees, but less than a majority, believed
legislative attention was needed; (9) 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; (10) the most frequently cited issues in these areas
were: (a) uncertainties as to how far the Board should go in letting the
Postal Service compete and operate like a private-sector corporation;
(b) the limited specificity in law concerning the Board's oversight
responsibilities, and (c) perceptions that the Chief Postal Inspector
may not have all the independence the position requires; and (11) 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.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-97-141
     TITLE:  U.S. Postal Service: Issues Related to Governance of the 
             Postal Service
      DATE:  08/14/97
   SUBJECT:  Federal corporations
             Postal service
             Postal law
             Postal rates
             Competition
             Comparative analysis
             Proposed legislation
             Executive compensation

             
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Cover
================================================================ COVER


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

Issues Related to Governance of the Postal Service

(240215)


Abbreviations
=============================================================== ABBREV

  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

Letter
=============================================================== LETTER


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 organizations\2 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. 


   BACKGROUND
------------------------------------------------------------ Letter :1

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.\3 The act providing appropriations\4 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. 


--------------------
\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. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

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. 

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 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. 


--------------------
\5 Managing the Public's Business:  Federal Government Corporations
(S.  Prt.  104-18, Apr.  1995). 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

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. 

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 report\10 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. 


--------------------
\6 The matrix was sent to 11 boards; however, COMSAT did not furnish
the information we requested. 

\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). 

\10 A Strategic Review of Progressive Postal Administrations: 
Competition, Commercialization, and Deregulation (Price Waterhouse
LLP, Feb.  1995). 


   AREAS WHERE A MAJORITY OF
   INTERVIEWEES BELIEVED
   LEGISLATIVE ATTENTION IS NEEDED
------------------------------------------------------------ Letter :4

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
---------------------------------------------------------- Letter :4.1

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.  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 Index\11 ); (2)
restricting PRC's ratemaking role to monopoly mail\12 --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 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 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 Index\14 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. 

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). 


--------------------
\11 The 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. 

\12 Monopoly 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). 

\13 Generally, the terms "noncompetitive mail" and "competitive mail"
are synonymous with "monopoly mail" and "nonmonopoly mail."

\14 The 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. 


      BOARD'S AUTHORITY TO PAY PMG
---------------------------------------------------------- Letter :4.2

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. 

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
Council\16 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 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 Association\20 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. 


--------------------
\15 By 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. 

\16 The 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). 

\17 Canada 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). 

\18 The 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. 

\19 See http://aflcio.paywatch.org

\20 The 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. 


      BOARD MEMBERS' PAY
---------------------------------------------------------- Letter :4.3

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 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 of about $38,000 that the Postal Service
Governors will likely receive in 1997 (salary plus the historical
average of daily meeting attendance fees). 


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


      QUALIFICATION REQUIREMENTS
      FOR BOARD MEMBERSHIP
---------------------------------------------------------- Letter :4.4

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 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 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. 


--------------------
\22 Donald H.  Thain and David S.  R.  Leighton, "Why Boards Fail,"
Business Quarterly (Spring 1995), p.  71. 


   AREAS WHERE SOME, BUT LESS THAN
   A MAJORITY OF, INTERVIEWEES
   BELIEVED LEGISLATIVE ATTENTION
   IS NEEDED
------------------------------------------------------------ Letter :5

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. 


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

\24 Clyde Linsley, "Government Inc.," Government Executive (Feb. 
1995). 


      BOARD MISSION AND
      RESPONSIBILITIES
---------------------------------------------------------- Letter :5.1

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 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. 


--------------------
\25 Seven 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. 

\26 Clyde Linsley, "Government Inc.," Government Executive (Feb. 
1995). 


      BOARD RELATIONSHIP WITH
      POSTAL MANAGEMENT
---------------------------------------------------------- Letter :5.2

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
---------------------------------------------------------- Letter :5.3

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. 

  -- 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
---------------------------------------------------------- Letter :5.4

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. 


--------------------
\27 Five 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. 


   AREAS WHERE NONE OF THE
   INTERVIEWEES BELIEVED
   LEGISLATIVE ATTENTION IS NEEDED
------------------------------------------------------------ Letter :6

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
------------------------------------------------------------ Letter :7

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 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. 


---------------------------------------------------------- Letter :7.1

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


DESCRIPTIONS OF VARIOUS
GOVERNMENT-CREATED ORGANIZATIONS
=========================================================== Appendix I

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. 

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. 


--------------------
\28 See Report on Government Corporations, Vols.  I-II (Washington,
D.C.:  NAPA, 1981). 


CURRENT AND FORMER POSTAL SERVICE
BOARD MEMBERS INTERVIEWED
========================================================== Appendix II

Name                    Position(s) held        Date(s) of appointment
----------------------  ----------------------  ----------------------
Susan E. Alvarado       Current Governor        July 1988

Winton M. Blount        Former PMG              January 1969
                        Former Board Chair      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
----------------------------------------------------------------------

INTERVIEW GUIDE
========================================================= Appendix III

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. 

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. 

BOARD STAFF

1.  Do you believe that the Board has sufficient staff resources?  If
not, what additional staff are needed (numbers, qualifications,
etc.)? 


SELECTED CHARACTERISTICS OF THE
POSTAL SERVICE'S BOARD OF
GOVERNORS AND OTHER BOARDS
========================================================== Appendix IV

Organization
the board                                                                                                                                                               Australia
directs          USPS              Fannie Mae        Freddie Mac       TVA                   RTB            FDIC           AMTRAK         CPB            Canada Post    Post
---------------  ----------------  ----------------  ----------------  ----------------  --  -------------  -------------  -------------  -------------  -------------  -------------
Organization background
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Legal status     Independent       Government-       Government-       Wholly-owned          Wholly-owned   Mixed-         Mixed-         Private,       "Parent Crown  Federal
                 establishment of  sponsored         sponsored         government            government     ownership      ownership      nonprofit      Corporation"   government
                 the executive     enterprise        enterprise        corporation           corporation\a  government     government     corporation    (fully owned   business
                 branch of the                                                                              corporation    corporation    organized      by the Crown)  enterprise
                 United States                                                                                                            under D.C.                    (fully owned
                 government                                                                                                               law                           by the
                                                                                                                                                                        Commonwealth
                                                                                                                                                                        Government of
                                                                                                                                                                        Australia)

Legal authority  Postal            Federal National  Federal Home      Tennessee Valley      7 U.S.C. 941-  12 U.S.C.      49 U.S.C.      47 U.S.C. 396  Canada Post    Australia
                 Reorganization    Mortgage          Loan Mortgage     Authority Act of      950b           1811-1835a     240101 et      et al.         Corporation    Postal
                 Act of 1970 and   Association       Corporation Act,  1933 and                                            seq.                          (CPC) Act      Corporation
                 amendments        Charter Act, as   as amended        amendments                                                                        1980 and       Act of 1989
                                   amended                                                                                                               amendments     and
                 [39 U.S.C.]                         [12 U.S.C. 1451-  [16 U.S.C. 831-                                                                                  amendments
                                   [12 U.S.C. 1716-  1459]             831dd]                                                                            [CPCA 1980-
                                   1723d]                                                                                                                81-82-83,
                                                                                                                                                         c.54 and
                                                                                                                                                         amendments]

Created          July 1, 1971      June 27, 1934     July 24, 1970     May 18, 1933          May 7, 1971    June 16, 1933  March 30,      March 27,      October 16,    January 1,
                                                                                                                           1971           1968           1981           1989\b

Mission/         To provide        To provide        To provide        To improve the        To obtain an   To insure      To provide     To facilitate  To establish   To supply
purpose          postal services   stability in the  stability in the  navigability of       adequate       deposits of    intercity and  the full       and operate a  postal
                 to bind the       secondary market  secondary market  the Tennessee         supply of      banks and      commuter rail  development    postal         services
                 nation through    for residential   for residential   River; provide        supplemental   savings        passenger      of public      service for    within
                 the personal,     mortgages;        mortgages;        for flood             funds, to the  associations.  transportatio  telecommunica  the            Australia and
                 educational,      respond           respond           control,              extent                        n in the       tions.         collection,    between
                 literary, and     appropriately to  appropriately to  reforestation,        feasible,                     United                        transmission,  Australia and
                 business          the private       the private       the proper use        from                          States.                       and delivery   places
                 correspondence    capital market;   capital market;   of marginal           nonfederal                                                  of messages,   outside
                 of the people;    provide ongoing   provide ongoing   lands, and the        sources to                                                  information,   Australia.
                 and to provide    assistance to     assistance to     agricultural and      (1) make                                                    funds, and     Australia
                 prompt,           the secondary     the secondary     industrial            loans to                                                    goods both     Post is also
                 reliable, and     market for        market for        development of        corporations                                                within Canada  able to carry
                 efficient         residential       residential       the Tennessee         and public                                                  and between    on any
                 service to        mortgages         mortgages         Valley; provide       bodies for                                                  Canada and     business or
                 patrons in all    (including        (including        for the national      the purpose                                                 places         activity,
                 areas and to      activities        activities        defense; and          of financing                                                outside        either in
                 render postal     relating to       relating to       provide an ample      or                                                          Canada;        Australia or
                 services to all   mortgages on      mortgages on      supply of             refinancing                                                 manufacture    overseas,
                 communities.      housing for low-  housing for low-  electric power        the                                                         and provide    relating to
                                   and moderate-     and moderate-     to seven-state        construction,                                               such products  the supply of
                                   income families   income families   region in the         improvement,                                                and to         postal
                                   involving a       involving a       southeastern          expansion,                                                  provide such   service.
                                   reasonable        reasonable        United States.        acquisition,                                                services as
                                   economic return   economic return                         and operation                                               are, in the    Australia
                                   that may be less  that may be less                        of telephone                                                opinion of     Post may also
                                   than the return   than the return                         lines,                                                      the            carry on any
                                   earned on other   earned on other                         facilities,                                                 Corporation,   business or
                                   activities) by    activities) by                          and systems;                                                necessary or   activity that
                                   increasing the    increasing the                          and (2)                                                     incidental to  is
                                   liquidity of      liquidity of                            conduct its                                                 the postal     conveniently
                                   mortgage          mortgage                                operations,                                                 service        carried on by
                                   investments and   investments and                         to the extent                                               provided by    use of
                                   improving the     improving the                           practicable,                                                the            resources not
                                   distribution of   distribution of                         on a self-                                                  Corporation;   immediately
                                   investment        investment                              sustaining                                                  and provide    required in
                                   capital           capital                                 basis.                                                      to or on       performing
                                   available for     available for                                                                                       behalf of      the principal
                                   residential       residential                                                                                         departments    function or
                                   mortgage          mortgage                                                                                            and agencies   in the course
                                   financing; and    financing; and                                                                                      of, and        of performing
                                   promote access    promote access                                                                                      corporation    the principal
                                   to mortgage       to mortgage                                                                                         owned,         function.
                                   credit            credit                                                                                              controlled,
                                   throughout the    throughout the                                                                                      or operated
                                   nation            nation                                                                                              by, the
                                   (including        (including                                                                                          Government of
                                   central cities,   central cities,                                                                                     Canada or a
                                   rural areas, and  rural areas, and                                                                                    provincial,
                                   underserved       underserved                                                                                         regional, or
                                   areas) by         areas) by                                                                                           municipal
                                   increasing the    increasing the                                                                                      government in
                                   liquidity of      liquidity of                                                                                        Canada or to
                                   mortgage          mortgage                                                                                            any person
                                   investments and   investments and                                                                                     services
                                   improving the     improving the                                                                                       that, in the
                                   distribution of   distribution of                                                                                     opinion of
                                   investment        investment                                                                                          the
                                   capital           capital                                                                                             Corporation,
                                   available for     available for                                                                                       are capable
                                   residential       residential                                                                                         of being
                                   mortgage          mortgage                                                                                            conveniently
                                   financing.        financing.                                                                                          provided in
                                                                                                                                                         the course of
                                                                                                                                                         carrying out
                                                                                                                                                         the other
                                                                                                                                                         objects of
                                                                                                                                                         the
                                                                                                                                                         Corporation.


Board authority
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Description of   Postal rates are  The Board has     Freddie Mac's     TVA's board has       The only       The board has  The board has  The board has  The board,     The board
board's          determined in     unilateral        charter           exclusive             product of     unilateral     unilateral     the authority  directly or    sets prices
authority to     conjunction with  authority to      explicitly        authority to set      RTB is loans.  authority to   authority to   to approve     indirectly     for all
set prices,      a Postal Rate     conduct business  provides that     prices, rates,        Loans are to   grant or deny  set prices,    prices;        through        products and
rates, etc.      Commission (PRC)  operations, but   Freddie Mac has   etc., for the         be made in     deposit        rates, etc.,   however, it    delegation of  services. The
                 recommendation.   generally day-    full discretion   products or           accordance     insurance to   without        has no         authority to   board must
                 The Governors     to-day business   in setting        services that         with the       financial      review or      products to    the            notify the
                 may approve a     activities are    prices and other  TVA sells.            requirements   institutions.  approval by    sell.          President/     Minister of
                 PRC-recommended   delegated to      business          The TVA act           contained in   Board          an             Specifically,  CEO, oversees  any intention
                 change; accept    management        operations.       contains              the Rural      decisions are  independent    CPB is not a   virtually all  to alter the
                 recommended       subject to                          standards for         Electrificati  not subject    regulatory     commodity      rate-making    price of the
                 change under      provisions of     There are no      determining           on Act,        to approval    authority.     business.      decisions.     standard
                 protest; reject   charter.          regulatory or     appropriate           Section        by another                                   The board, in  postal rate
                 or, in limited                      other external    levels for TVA's      408(a).        regulatory                                   delegating     (the reserved
                 circumstances,                      limits on the     electric power        Interest       authority.                                   its            service), and
                 modify                              authority of      rates but             rates are                                                   authority,     the Minister
                 recommended                         Freddie Mac's     commits the           determined by                                               has            has the
                 change.                             management to     fixing of those       a formula set                                               established    opportunity
                                                     set prices for    rates to the          by law in the                                               that (1) all   to disallow
                 PRC is an                           mortgages it      discretion of         Act, Section                                                rates          it.
                 independent                         purchases and     the TVA board         408(b).                                                     established
                 agency that acts                    the securities    and precludes                                                                     through        The
                 upon requests                       it issues.        judicial review       The U.S.                                                    regulation     Australian
                 from the USPS or                                      thereof.\             Department of                                               (i.e.,         Competition
                 in response to                                                              Agriculture                                                 noncompetitiv  and Consumer
                 complaints filed                                      With one              Rural                                                       e products)    Council,
                 by interested                                         exception, no         Utilities                                                   require        while having
                 parties. Among                                        statutory             Service is                                                  approval of    no direct
                 its major                                             provision             responsible                                                 the board,     authority
                 responsibilities                                      authorizes            for the day-                                                (2) all        over the
                 are to submit                                         another person,       to-day                                                      generic rates  price, has
                 recommended                                           board, or             operation of                                                (rates         the
                 decisions to the                                      commission to         RTB, and                                                    available to   opportunity
                 USPS on postage                                       set or review         Congress                                                    anyone         to consider
                 rates and fees                                        prices.\c             maintains                                                   meeting        any proposal
                 and mail                                                                    regulatory                                                  specified      and make its
                 classifications,                                                            authority.                                                  terms and      views known
                 issue advisory                                                                                                                          conditions)    to the
                 opinions to the                                                                                                                         established    Minister as
                 USPS on proposed                                                                                                                        outside of     part of his/
                 nationwide                                                                                                                              regulation     her
                 changes in                                                                                                                              require the    consideration
                 postal services,                                                                                                                        President/     of proposed
                 and submit                                                                                                                              CEO's          price
                 recommendations                                                                                                                         approval, and  alterations.
                 for changes in                                                                                                                          (3) all sales
                 the mail                                                                                                                                agreements
                 classification                                                                                                                          (generic or
                 schedule.                                                                                                                               non-generic)
                                                                                                                                                         are subject
                                                                                                                                                         to the
                                                                                                                                                         board's
                                                                                                                                                         delegation of
                                                                                                                                                         authority
                                                                                                                                                         instrument
                                                                                                                                                         and related
                                                                                                                                                         processes.

Does board set   Yes, Governors    Yes, the Board    Yes, the Board    Yes, the board        No.            No, the pay    Yes.           Yes, but       No, the CEO's  Yes.
pay for CEO?     set pay of the    is authorized to  of Directors      sets                                 of the Chair                  president may  pay is set by
                 PMG, subject to   fix compensation  determines        compensation for                     of the Board                  not be         Governor in
                 limitations of    for the officers  compensation of   all TVA                              ("CEO") is                    compensated    Council.
                 39 U.S.C.         of the            officers.         employees.                           determined by                 at an annual
                 1003(a); i.e.,    Corporation.                        Salary for                           reference to                  rate of pay
                 salary cannot                                         regular                              Federal                       that exceeds
                 exceed the rate                                       employees may                        Statutes--                    the rate of
                 for Level I of                                        not exceed that                      Level III of                  basic pay in
                 the Executive                                         received by                          the Executive                 effect from
                 Schedule.                                             board members.                       Schedule.                     time to time
                                                                                                                                          for Level I
                                                                                                                                          of the
                                                                                                                                          Executive
                                                                                                                                          Schedule
                                                                                                                                          under Sec.
                                                                                                                                          5312 of Title
                                                                                                                                          5.

Does board set   Yes, subject to   Yes, the Board    Yes, the Board    Yes, the board        No.            Yes.           Yes, under 49  Yes.           No, benefits   Yes.
benefits for     restrictions of   is authorized to  of Directors      sets                                                U.S.C.                       are set by
CEO?             Federal           fix compensation  determines        compensation,                                       24303(b).                     the Governor
                 Retirement and    for officers of   benefits of       including                                                                         in Council.
                 Workers           the Corporation.  officers.         benefits, for
                 Compensation                                          all appointees.
                 Laws.

CEO              $148,400          $800,000 salary;  $865,000          Not applicable.       Annual         The Chair's    The CEO's      $148,400       This is not    Not publicly
compensation                       $833,263 bonus;   salary;                                 compensation   total pay and  compensation                  considered     available.\e
(FY95)\d                           and               $394,000 bonus;                         is to conform  benefits       does not                      public
                                   $23,102 other     and                                     to provisions  compensation   exceed the                    information.\  Terms and
                                   annual            $100,688 other                          of the         for FY95 was   Federal                       e              conditions
                                   compensation, as  annual                                  federal        $147,014.74.   Executive                                    are set at a
                                   well as long-     compensation, as                        executive                     Level I                       However, the   level that
                                   term              well as long-                           salary                        salary                        CPC Board      takes into
                                   compensation in   term                                    schedule.                     scale.                        contact        account both
                                   the form of       compensation in                                                                                     provided a     public and
                                   stock awards and  the form of                             $108,200                      The CEO                       range of       private
                                   securities        restricted stock                        salary and                    receives the                  salary that    sector
                                   options.          awards and                              approximately                 following                     is public:     consideration
                                                     securities                              20% of that                   benefits:                     $189,000 to    s. Prior
                                                     options.                                for benefits                  health                        $233,000       consultation
                                                                                             for the                       insurance, an                 (U.S.          with the
                                                                                             Administrator                 employer-                     dollars).      Remuneration
                                                                                             of Rural                      paid                                         Tribunal is
                                                                                             Utilities                     retirement                    The benefit    part of the
                                                                                             Services, who                 income plan,                  package is     process of
                                                                                             serves as the                 a 401(k)                      worth about    establishing
                                                                                             CEO of the                    retirement                    20% of         a package.
                                                                                             telephone                     savings plan,                 salary.
                                                                                             bank.                         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.


Board compensation
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Description of   For Governors,    Board advised by  Pursuant to a     Salary of TVA         Determined by  Salary is      Pay and        By statute.    Determined by  Determined by
how salaries     salary and        outside experts   resolution        Board Chair is        statute.       determined     expenses are                  the Governor   an
and benefits     reimbursable      on appropriate    adopted by the    established                          under federal  set by                        in Council.    independent
for Board        expenses          levels of         board, the 15     under Level III                      statutes --    statute.                                     central
members are      determined by     compensation      outside           of the Executive                     Level III of                                                remuneration
determined and   statute.          based on          directors         Schedule Salary.                     the Executive                                               tribunal.
approved                           payments made by  receive an                                             Schedule for
                 Governors         comparable        annual retainer,  The salary of                        Chairperson
                 determine pay of  businesses.       annual award of   the other two                        and Level IV
                 PMG and DPMG                        stock options     members of the                       for other
                 within                              and restricted    TVA board is                         members.
                 legislatively                       stock, and        established
                 established                         meeting           under Level IV
                 parameters.                         attendance fees.  of the Executive
                                                                       Schedule.
                                                     They do not       Benefits
                                                     receive salaries  available to
                                                     or other          board members
                                                     employee          are those
                                                     benefits.         generally
                                                                       available to
                                                                       federal
                                                                       employees,
                                                                       including
                                                                       presidential
                                                                       appointees, by
                                                                       statute.


Description of   Governors'        Generally annual  Board members     The Chairman and      Salaries and   Board          Adjustment     Salaries and   Increases are  The
how increases    salaries are set  adjustments.      receive cash      two directors of      benefits have  members'       would require  benefits may   not made on a  Remuneration
in salaries and  by legislation.                     fees and stock    the TVA board         not been       salaries are   legislative    be changed by  regular        Tribunal
other benefits   From 1970 to      Board is advised  awards as their   are positions         increased      set by         change.        an act of      basis. They    regularly
occur            1995, there were  by outside        compensation.     covered by level      since          statute (5                    Congress at    are made       examines
                 no salary         experts on        Adjustments for   III and level         establishment  U.S.C. 5314                  any time.      following a    remuneration
                 increases. In     appropriate       inflation are     IV,                   of Board in    and 5315)                                   recommendatio  levels and
                 1996, salaries    levels of         not included in   respectively, of      1971.          under                                        n from the     will consult
                 were increased    compensation      the criteria for  the Executive         Adjustments    appropriate                                  Minister       with the
                 by legislation.   based on          setting           Schedule (5           would be made  executive                                    responsible    board on
                                   payments made by  compensation.     U.S.C. 5314 and      legislatively  levels.                                      for Canada     specific
                 PMG and DPMG      comparable        However, from     5315).               .              Changes would                                Post to the    issues.
                 salaries are set  businesses.       time to time      Increases in pay                     be done                                      Governor in
                 by the                              Freddie Mac       are done through                     legislatively                                Council. The
                 Governors,                          reviews the       the legislative                      .                                            last
                 subject to a pay                    compensation      process.                                                                          adjustment
                 cap.                                package for                                                                                         was made by
                                                     board members to                                                                                    the Governor
                 Increases in pay                    ensure that it                                                                                      in Council in
                 are done through                    remains                                                                                             1990.
                 the legislative                     competitive.
                 process.

Is member        Full time for     Full time for 3   Part time. Board  Full time             Part time      Full time      Part time      Part time      Part time      Full time for
service full or  PMG and DPMG.     management        members provide                                                                                                    Managing
part time?                         employees and     service year                                                                                                       Director and
                 Part time for     part time for     round. There is                                                                                                    part time for
                 Governors.        rest of board,    no fixed-hour                                                                                                      other
                                   who are outside   requirement for                                                                                                    Directors.
                                   management        service.
                                   directors.

Current annual   $30,000 plus      $23,000 retainer  $20,000 retainer  Effective             Board members  $123,100 for   Board members  $150 a day     $437 (U.S.     Directors--
salary of board  $300 a day for    annually, plus    annually,         January 1,            from the       Chair          receive $300   while          dollars) for   $27,650 (U.S.
members          not more than 42  $1,000 for        prorated based    1996:                 general                       per diem for   attending      physical       dollars)
                 days of meetings  attending each    on the quarter                          public and     $115,700 for   attending      meetings or    attendance at
                 per year for      board or board    in which they     $115,700 for          elected        other board    board and      while engaged  board or       Deputy Chair-
                 Governors.        committee         were appointed.   Board members         members        members        committee      in duties      board          -$37,750
                                   meeting.                                                  receive $100                  meetings or    related to     committee      (U.S.
                 $148,400 salary                     Directors also    $123,100 for          each day (or   Board service  conducting     such meetings  meetings.      dollars)
                 for PMG           Committee chairs  were paid $1,000  Chairman              part thereof)  is full time;  other          or other
                                   received an       for attendance                          for up to 50   therefore, no  official       activities of  The $437       Chair--
                 $148,000 salary   additional $500   at each meeting   Board service is      days per       daily meeting  business of    the board,     (U.S.          $58,700 (U.S.
                 for DPMG          for each          of the board or   full time;            year, spent    attendance     the            including      dollars) is    dollars)
                                   committee         any board         therefore, no         in the         fees paid.     Corporation.   travel time.   also payable
                                   meeting they      committee         daily meeting         performance                                                 for each full  No daily
                                   chaired.\         meeting and were  attendance fees       of their                      The $300 per   No board       day of travel  meeting
                                                     reimbursed for    paid.                 official                      diem is a      member shall   to and from    attendance
                                   Additionally,     out-of-pocket                           duties.                       fixed          receive        the meeting.   fees paid.
                                   each              costs of                                                              statutory      compensation
                                   nonmanagement     attending such                          Federal                       compensation   of more than   Board members
                                   director has      meetings.                               employees                     level that     $10,000 in     are paid an
                                   restricted                                                appointed to                  has been in    any fiscal     annual
                                   common stock      Each board                              the Board                     place since    year.          retainer
                                   under the Fannie  committee                               receive no                    the board was                 ($4,080 to
                                   Mae Restricted    chairman also                           additional                    created.                      $5,100 U.S.
                                   Stock Plan for    received an                             compensation                                                dollars) that
                                   Directors and     annual retainer                         for serving                                                 is set by
                                   stock options     of $2,500.                              on the                                                      Order-in-
                                   under the Fannie                                          Board.                                                      Council
                                   Mae Stock         Pursuant to the                                                                                     (i.e., by Her
                                   Compensation      1995 Directors'                                                                                     Majesty's
                                   Plan of 1993.     Stock                                                                                               Government)
                                   Fannie Mae        Compensation                                                                                        on the
                                   officers who      Plan,\f each                                                                                        recommendatio
                                   serve on the      Director was                                                                                        n of the
                                   Board of          granted options                                                                                     responsible
                                   Directors do not  to purchase                                                                                         Minister.
                                   receive           2,400 shares of
                                   compensation for  the
                                   serving as        Corporation's
                                   directors other   common stock and
                                   than the          received shares
                                   compensation      of restricted
                                   they receive as   stock having a
                                   Fannie Mae        fair market
                                   officers. Fannie  value of
                                   Mae officers are  approximately
                                   not eligible to   $10,000 on the
                                   participate in    date of the
                                   the Fannie Mae    award.
                                   Restricted Stock
                                   Plan for
                                   Directors and
                                   are not eligible
                                   to receive
                                   nonmanagement
                                   director stock
                                   options under
                                   the Fannie Mae
                                   Stock
                                   Compensation
                                   Plan of 1993.


Board composition/qualifications
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of board  11                18                18                3                     13             5              9              9              11             Up to 9
members                                                                                                                                                                 Directors.
                 (9 Governors                                                                                                             (6 current     (9 Directors
                 plus the PMG and                                                                                                         members and 3  plus the
                 DPMG)                                                                                                                    vacancies).    Chair and
                                                                                                                                                         President).

How board        9 Governors       13 members        5 appointed by    Appointed by the      7 appointed    3 appointed    3 members are  Appointed by   9 Directors    Directors are
members are      appointed by the  elected by        the President of  President of the      by the         by the         appointed by   the President  are appointed  appointed by
selected         President of the  shareholders.     the United        United States         President of   President of   President of   of the United  by the         the Governor-
                 United States,                      States.           with the advice       the United     the United     the United     States with    Minister with  General on
                 by and with the   5 members                           and consent of        States (5 of   States, by     States and     the advice     the approval   the
                 consent of the    appointed by      13 elected by     the Senate.           whom shall be  and with the   confirmed by   and consent    of the         nomination of
                 Senate.           President of the  voting common                           officers or    advice and     the Senate     of Senate.     Governor in    the Minister
                                   United States.    stockholders.                           employees of   consent of     (representing                 Council.       for
                 Governors                                                                   the            the Senate.    labor, state                  The Governor   Communication
                 appoint PMG.                                                                Department of                 governors,                    in Council     s and the
                                                                                             Agriculture    1 member       and                           appoints the   Arts.
                 Governors and                                                               and not        shall be the   business).                    Chair and
                 PMG appoint                                                                 officers or    Comptroller                                  President/     The Managing
                 DPMG.                                                                       employees of   of the         2 members                     CEO .          Director is
                                                                                             the Rural      Currency.      represent                                    appointed by
                                                                                             Utilities                     commuter                                     the Board of
                                                                                             Services, and  1 shall be     authorities                                  Directors.
                                                                                             2 of whom      the Director   and are
                                                                                             shall be from  of the Office  selected by                                  The Minister
                                                                                             the general    of Thrift      the President                                must consult
                                                                                             public and     Supervision.   from lists                                   with the
                                                                                             not officers                  drawn up by                                  Chair of Post
                                                                                             or employees                  those                                        prior to
                                                                                             of the                        authorities.                                 appointing
                                                                                             federal                                                                    Directors,
                                                                                             government).                  2 are                                        and one
                                                                                                                           selected by                                  Director must
                                                                                             3 elected by                  the                                          be recognized
                                                                                             stockholders                  Corporation's                                as having an
                                                                                             of eligible                   preferred                                    appropriate
                                                                                             cooperative                   stockholder-                                 understanding
                                                                                             borrowers.                    -the                                         of the
                                                                                                                           Department of                                interests of
                                                                                             3 elected by                  Transportatio                                employees.
                                                                                             stockholders                  n.
                                                                                             of eligible
                                                                                             commercial                    The Secretary
                                                                                             borrowers.                    of
                                                                                                                           Transportatio
                                                                                                                           n and Amtrak
                                                                                                                           President
                                                                                                                           serve by
                                                                                                                           virtue of
                                                                                                                           their
                                                                                                                           offices.

Number of years  9 years for the   1 year            1 year            9 year fixed          At pleasure    6 years for    3 members      The term of    Not to exceed  Up to 5 years
members are to   9 Governors. A                                        terms are             of the         each           appointed by   office of      3 years for    for Directors
serve            Governor may                                          staggered so          President of   appointed      the President  each member    Directors.     as specified
                 continue to                                           that one begins       the United     member, but    of the United  of the board                  in the
                 serve up to 1                                         every 3 years on      States for     they may       States and     appointed by   As determined  instrument of
                 year after term                                       May 18 (e.g.,         appointed      continue to    confirmed by   the President  by Governor    appointment.
                 expires while                                         1990, 1993, and       members.       serve after    the Senate     of the United  in Council
                 awaiting a                                            1996).                               the            (representing  States shall   for Chair and
                 successor to be                                                             2-year terms   expiration of  labor, state   be:            President/
                 named.                                                                      for elected    their terms    governors,                    CEO.
                                                                                             members.       of office      and business)  6 years,
                 PMG serves at                                                                              until a        serve for 4    except as
                 pleasure of                                                                                successor has  years.         provided in
                 Governors.                                                                                 been                          section 5(c)
                                                                                                            appointed and  2 members      of the Public
                 DPMG serves at                                                                             qualified.     representing   Telecommunica
                 pleasure of                                                                                               commuter       tions Act of
                 Governors and                                                                              Others serve   authorities    1992.
                 PMG.                                                                                       during their   serve for 2
                                                                                                            terms as       years.         Any member
                                                                                                            Comptroller                   whose term
                                                                                                            of Currency    2 members      has expired
                                                                                                            and Director   selected by    may serve
                                                                                                            of the Office  the            until such
                                                                                                            of Thrift      Corporation's  member's
                                                                                                            Supervision.   preferred      successor has
                                                                                                                           stockholder,   taken office,
                                                                                                                           the            or until the
                                                                                                                           Department of  end of the
                                                                                                                           Transportatio  calendar year
                                                                                                                           n, serve for   in which such
                                                                                                                           1 year.        member's term
                                                                                                                                          has expired,
                                                                                                                           2 ex officio   whichever is
                                                                                                                           members (the   earlier.
                                                                                                                           Secretary of
                                                                                                                           Transportatio  Any member
                                                                                                                           n and the      appointed to
                                                                                                                           President of   fill a
                                                                                                                           AMTRAK) serve  vacancy
                                                                                                                           as members as  occurring
                                                                                                                           long as they   prior to the
                                                                                                                           remain in      expiration of
                                                                                                                           their          the term for
                                                                                                                           positions as   which such
                                                                                                                           Secretary of   member's
                                                                                                                           Transportatio  predecessor
                                                                                                                           n and          was appointed
                                                                                                                           President of   shall be
                                                                                                                           AMTRAK.        appointed for
                                                                                                                                          the remainder
                                                                                                                                          of such term.

Board member     Qualifications    Of 5              At least:         Each member must      5 members      Appointed      Directors      No more than   None           The board
qualifications   are not           presidentially                      be a U.S.             appointed by   board members  must be U.S.   6 of the       specified.     must have a
and              prescribed in     appointed         1 from home-      citizen and           the President  must be U.S.   citizens.      appointed                     mix of skills
restrictions as  legislation.      members, at       building          profess a belief      of the United  citizens, and                 members may                   appropriate
stated in                          least:            industry;         in the                States must    not more than  Secretary of   be from the                   for the
legislation      No restrictions                                       feasibility and       be officers    3 of the       Transportatio  same                          Corporation.
                 in legislation    1 must be from    1 from mortgage   wisdom of the         or employees   members may    n serves as    political                     One member is
                 regarding who     mortgage lending  lending           TVA Act of 1933.      of the         be members of  Board member   party.                        to have an
                 can be PMG and    industry;         industry;                               Department of  the same       by virtue of                                 appropriate
                 DPMG.                                                 Members are           Agriculture    political      his office.    The 9                         understanding
                                   1 from            1 from real       prohibited from       and not        party.                        appointed                     of the
                 No political      homebuilding      estate industry;  having a              officers or                   Amtrak's       members shall                 interests of
                 recommendations   industry;         and               financial             employees of                  President      be selected                   employees.
                 may be                                                interest in any       the Rural                     serves as the  from such
                 considered when   1 from real       1 from an         public utility        Utilities                     Chairman of    fields as
                 selecting PMG     estate industry;  organization      corporation           Services.                     the board by   education,
                 and DPMG.         and               that has          engaged in the                                      virtue of his  cultural and
                                                     represented       business of           2 members                     office.        civic
                 Governors are     1 from an         consumer          distributing and      appointed by                                 affairs, or
                 chosen to         organization      interests for     selling power to      the President                 3 members are  the arts--
                 represent the     that represents   not less than 2   the public or in      of the United                 appointed by   including
                 public interest   consumer          years, or 1       any corporation       States must                   the President  radio and
                 generally and     interests for     person who has    engaged in the        be from the                   of the United  television--
                 cannot be         not less than 2   demonstrated a    manufacture,          general                       States and     and represent
                 representatives   years, or 1       career            selling, or           public and                    confirmed by   various
                 of specific       person who has    commitment to     distribution of       not officers                  the Senate     regions of
                 interests using   demonstrated a    the provision of  fixed nitrogen        or employees                  (representing  the nation,
                 the USPS.         career            housing for low-  or fertilizer,        of the                        labor, state   professions,
                                   commitment to     income            or any                federal                       governors,     and
                 Not more than 5   the provision of  households.       ingredients           government.                   and            occupations,
                 of the Governors  housing for low-                    thereof; nor                                        business).     and represent
                 can be members    income                              shall any member      3 members                                    various kinds
                 of the same       households.                         have any              must be                       2 members      of talent and
                 political                                             interest in any       elected from                  represent      experience
                 party.                                                business that         cooperative-                  commuter       appropriate
                                                                       may be adversely      type                          authorities    to the
                 No officer or                                         affected by the       organizations                 and are        function and
                 employee of the                                       success of the        .                             selected by    responsibilit
                 United States                                         corporation as                                      the President  ies of CPB.
                 may serve                                             producer of           3 members                     of the United
                 concurrently as                                       concentrated          must be                       States from    Of these
                 a Governor.                                           fertilizers or        elected from                  lists drawn    appointed
                                                                       as a producer of      commercial-                   up by those    members, 1
                 A Governor may                                        electric power.       type                          authorities.   shall be
                 hold any other                                                              organizations                                selected from
                 office or                                             Also, board           .                             2 members are  among
                 employment not                                        members are                                         selected by    individuals
                 inconsistent or                                       prohibited,                                         the            who represent
                 in conflict with                                      during their          Elected board                 Corporation's  the licensees
                 his duties,                                           tenure in             members must                  preferred      and
                 responsibilities                                      office, from          be officials                  stockholder.   permittees of
                 , and powers as                                       engaging in any       (managers,                                   public
                 an officer of                                         other business.       directors,                                   television
                 the USPS.                                                                   etc.) of the                                 stations, and
                                                                                             organization                                 1 shall
                                                                                             they                                         represent the
                                                                                             represent.                                   licensees and
                                                                                                                                          permittees of
                                                                                                                                          public radio
                                                                                                                                          stations.


Are there        Nothing           A director        No, but           None.                 No.            There are no   None.          Yes. No        No. Law        None
restrictions on  specified in      should not be     stockholder-                                           restrictions                  member of the  states that a  specified in
the number of    statute or        renominated       elected                                                contained in                  board shall    Director may,  enabling
terms a member   regulation.       after having      directors must                                         the statute.                  be eligible    on the         legislation.
can serve?                         served for 10     retire at age                                                                        to serve in    expiration of  Directors
                                   years or longer,  72.                                                                                  excess of 2    his/her term   have been
                                   although                                                                                               consecutive    of office, be  reappointed.
                                   nominating                                                                                             full terms.    reappointed
                                   committee may                                                                                                         to the board.
                                   for good reason
                                   propose the
                                   renomination of
                                   such a director.
                                   No director
                                   should be
                                   proposed for
                                   renomination
                                   after 15 years
                                   of Board
                                   service.

Is board         Board of          Board of          Board of          Board of              Board of       Board of       Board of       Board of       Board of       Board of
referred to as   Governors.        Directors.        Directors.        Directors.            Directors.     Directors.     Directors.     Directors.     Directors.     Directors.
"Board of
Directors,"
"Board of
Governors" or
by another
title?

How is Chair     Elected by the    Elected by        By annual vote    Designated by         Elected by     One of the     President      Members of     The chair is   Chair is
selected?        Governors from    Board.            of the Board of   the President of      Board          appointed      serves as      the board      appointed by   selected by
                 among the                           Directors.        the United            members.       members shall  Chair.         annually       the Governor   the Minister,
                 members of the                                        States.                              be designated                 elect one of   in Council.    with
                 Board.                                                                                     by the                        their members                 appointment
                                                                                                            President of                  to be Chair                   made by
                                                                                                            the United                    and elect one                 Governor
                                                                                                            States, by                    or more of                    General.
                                                                                                            and with the                  their members
                                                                                                            advice and                    as a Vice
                                                                                                            consent of                    Chair or Vice
                                                                                                            the Senate,                   Chairs.
                                                                                                            to serve as
                                                                                                            Chair of the
                                                                                                            Board of
                                                                                                            Directors for
                                                                                                            a term of 5
                                                                                                            years.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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. 

\a Until 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). 

\b The 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. 

\c Section 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. 

\d Some organizations provided data on pay and benefits, and others
provided information only on pay. 

\e The 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. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE U.S.  POSTAL
SERVICE
========================================================== Appendix IV



(See figure in printed edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE U.S.  POSTAL
SERVICE BOARD OF GOVERNORS
========================================================== Appendix IV


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII

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


*** End of document. ***