Round Table State-owned Companies – How They Use Corporate Governance and How They Can Stop the Political Clientele, 28th June 2017
Assessing corporate governance of state-owned companies – from the perspective of preventing corruption, clientelism and capturing the state in a very vulnerable area of the economy, that of public enterprises, was the topic debated yesterday at the Ministry of Justice by the Romanian Center for European Policies, Expert Forum and Freedom House Romania. The first findings of the research on corruption prevention and clientelism in state-owned Romanian companies were put to the test by representatives of public enterprises, ministries, including coordinators of the National Anti-Corruption Strategy and independent experts.
The first conclusions, following the results of an experts’ national survey, show that use of the main corporate governance tool, Law 111/2016 for the approval of Government Emergency Ordinance 109/2011 on Corporate Governance of Public Enterprises, has difficulties in implementation and recent political attempts risk compromising the progress that has been built up until now with so much effort.
Therefore, according to the consulted experts:
◦ There is no clear mechanism for assigning responsibilities and tasks to monitor performance. The Ministry of Finance and the public oversight authorities share this responsibility, but face institutional limitations in the effective implementation of optimal monitoring;
◦ Local state companies are in a critical situation. Their budgetary execution is often non-transparent and there is a high politicisation incidence, nepotism;
◦ Institutional instability has blocked the development of its own assumed monitoring mechanisms and evaluation at the level of the ministries/tutelary public authorities;
◦ Networks capturing and misusing public resources have been strengthened, which makes the effort to combat them require a strategic, structured approach – the fight against corruption is not followed by concrete, effective and visible prevention and control measures;
◦ The financial situation of many state-owned Romanian companies is extremely sensitive at the moment, with the challenges of lowering the value and the anticipated investment period, and the uncertainty about their future (e.g. insolvency, restructuring);
◦ Politicization and uncertainty put additional pressure on the economic and financial decisions that state-owned companies have to assume, thus further affecting the potential of using state budget financing.
Corporate governance does not just exist because we ask others, but it helps the performance of state-owned companies
“Not only corruption is the problem in state-owned companies, a major problem is the lack of competence and understanding of corporate governance. We have very good legislation, but a misunderstanding and misapplication of it. Why do we need corporate governance? Not just to tick what we discussed with the EU, the IMF or the OECD, but to capitalize on the potential of state-owned companies and improve their performance”, Sorana Baciu, former state secretary at the Ministry of Economy in the technocratic government
There are sanctions, the Ministry of Public Finance can fine the ministries
“The major problem is not the legislation we have, but its implementation. We do not have to reinvent it, we have made progress here. What I think is missing from Law 111 is tougher sanctions for those who do not apply the law, we have this tool, but we do not use it. We are being put in front of the situation in which in many companies we have management boards or interim management, and they have passed the due date in which they had to organize and select managers for four years but it is still not happening. Here I believe that the Ministry of Public Finance should apply fines if the law is not implemented”, Adrian Cighi, permanent representative of Fondul Proprietatea.
“At the beginning of the year, we asked all tutelary authorities for a report on the issues they faced with corporate governance, what improvement proposals they had, in order to incorporate their perspective into the corporate governance guide. Do you know how many answers did I get? I think I can count them on the fingers of one hand and most of them were also very vague answers. There is a need for more involvement in this sphere”. Lucian Duca, Ministry of Public Finance.
The conclusions of the analysis presented by the consortium are the result of the project “State-Owned Companies – Prevention of Corruption and State Capture” supported by the European Commission’s Economic and Financial Crime, Corruption, Environmental Crime programme and co-funded by the Open Society Foundation.
Details about the regional and Romanian approach of the project can be found in Romanian on www.statecapture.ro and in English on www.statecapture.eu