On April 1, MPs supported the draft law, which adds another possibility to dismiss foreign members of supervisory boards of state-owned enterprises and banks. Under martial law, it will be possible to terminate powers or terminate the contract if a person does not appear immediately at the address of the enterprise or bank. TI Ukraine emphasizes that this is a dangerous practice that will only harm the effective activities of the supervisory boards. We believe that the President should veto this law.
Currently, there is no air service in Ukraine, so, foreign experts are simply physically unable to immediately cross the border and arrive at a certain place. However, even for those members of the supervisory boards who are now in Ukraine, it will be difficult — the rail and road connections are disrupted, the country is constantly being shelled. Additional travel can be dangerous to people’s lives and health.
Instead, supervisory boards can fully work and hold meetings online. Since 2020, when the world was forced to work remotely due to the pandemic, Ukrainian state-owned companies have also developed appropriate mechanisms. The physical presence of members of the supervisory boards at enterprises or in banks is not critically necessary.
The corporate governance reform in Ukraine has been ongoing since 2016. Since then, Ukraine has committed to implement the Organization for Economic Cooperation and Development (OECD) corporate governance principles. Since the beginning of the reform, a significant number of international experts in supervisory boards prevent political interference and corruption in state-owned enterprises, increase the efficiency and transparency of their activities.
In particular, thanks to foreign members who are experts at the international level, it was possible to improve the financial performance of companies. Naftogaz, PrivatBank, Ukrposhta turned from unprofitable to profitable. The corporate governance reform of national banks was one of the conditions for continued cooperation with the IMF.
The adopted law can have an extremely negative impact on corporate governance. Although it will only operate during the period of martial law, this time is already sufficient to take a step back in this area.
For reference:
Supervisory boards are collegial management bodies of companies that influence the enterprise development strategy. The competence of the supervisory boards, as a rule, includes such things as the appointment (election) of the head of the enterprise, approval of draft strategies, decision-making on the selection of an independent auditor, consent to commit business obligations, approval of a plan of target financial indicators or an anti-corruption policy, etc.
