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Postal Chief’s Delay on Retirement Signals Outside Candidates

Jan. 13, 2020, 3:01 PM

The postponement of U.S. Postal Service chief Megan Brennan‘s planned retirement may mean the service is considering an outsider to be the next postmaster general, a prospect that alarms some union leaders.

“If they were searching inside the Postal Service, they would be done already,” said Paul Hogrogian, president of the National Postal Mail Handlers Union, which represents about 47,000 USPS workers. When Patrick Donahoe, the postmaster general before Brennan, stepped down, he immediately announced that Brennan—like Donahoe, a longtime USPS employee who rose through the ranks—would be replacing him. The USPS said Jan. 6 that Brennan would be staying on past Jan. 31, her previously announced retirement date, “to facilitate the search and transition process” for a new chief.

A search committee could be presenting the USPS Board of Governors with the names of possible candidates—likely from outside the USPS—by the end of the first week of February, said Ronnie Stutts, president of the National Rural Letter Carriers’ Association, which represents about 131,000 rural letter carriers. If that happens, a new chief could be in place by sometime in March, he said.

“I hope this means they will take their time and try to get someone who’s pro-Postal Service” rather than someone who will seek to dismantle the service as it exists now, Stutts said of Brennan’s decision to delay her retirement. Brennan has spoken with the board and the search committee about what’s involved in the job, Stutts said. She will meet Jan. 14 with the heads of the major postal unions to discuss the service’s current financial condition—including how the recent holiday season shaped up, he said.

‘Close to the Vest’

The Postal Service isn’t sharing much information about the search, said Mark Dimondstein, president of the American Postal Workers Union, which represents about 200,000 USPS employees.

“They are really holding their cards close to the vest,” he said.

Dimondstein, Hogrogian, Stutts, and other union leaders are concerned that the next postmaster general could favor privatization, which they say would erode the Postal Service’s mission of providing universal mail service. With about 634,000 mostly union-represented workers, the service is the hub of the U.S. mailing industry and the roughly 7.5 million jobs it supports. The USPS has been losing money for years, in large part because of a requirement in a 2006 law that it prefund its projected future retirement liabilities.

Global management consultant Russell Reynolds Associates is helping the Postal Service’s Board of Governors find the next postmaster general. The company didn’t immediately respond to requests for comment.

“The Governors have retained an executive search firm, and a nationwide search process is underway. There is no set date by which that process must be completed,” USPS spokesman David Partenheimer said in a statement.

It’s telling that Brennan has delayed her retirement, Dimondstein said. “Whatever process they are going through is apparently not done,” which could mean the service is considering private-sector CEOs, he said.

Pay Cut for CEOs

If an outsider is picked, it most likely would be someone near the end of their career who’s willing to take a large pay cut because they want “to give back,” said Arthur Sackler of the Coalition for a 21st Century Postal Service, which represents a wide variety of U.S. mailers, including Amazon.com Inc., eBay Inc., and the Greeting Card Association.

People who accept the top job without prior government experience can find it difficult to adjust, Sackler said, citing the experience of USPS chiefs hired from the private sector in the 1980s and 1990s.

For example, executives who have longstanding relationships with trusted vendors can’t freely enter into contracts with them on behalf of the Postal Service because of restrictions on sole-source contracts, he said.

“You can’t do that kind of thing. There are numerous examples that are difficult for people trying to make transition from private sector, which is much freer from inhibiting rules,” Sackler said.

The difficulties inherent in getting a chief executive officer from a large private-sector company to consider the top job at the Postal Service may explain the delay, Hogrogian and Stutts said in separate interviews. “If you are the CEO of a Fortune 500 company, and you are offered in the $300,000 or $400,000 range, that would be quite a pay cut,” Hogrogian said.

Whoever takes the position will come in at a time when the USPS is facing major financial challenges, he added.

“I’m concerned that a person from the outside who doesn’t understand the nuances and just starts cutting” costs will only make the problems worse, Hogrogian said. The result could be “a death spiral” where cuts result in more revenue losses which in turn lead to more cuts and ultimately to privatization of the USPS, he said.

The service lost $8.8 billion in fiscal year 2019, Brennan said in November. Increased operating expenses—$79.9 billion in FY 2019—more than offset the $71.1 billion in operating revenue the service earned during the fiscal year, Brennan and USPS Chief Financial Officer Joe Corbett said in discussing the results.

To contact the reporter on this story: Louis C. LaBrecque in Washington at llabrecque@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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