MINSK, 18 December (BelTA) – The State Property Committee has prepared proposals on appointing representatives of the state to the most important joint-stock companies with a state share in their charter capital. Prime Minister of Belarus Sergei Rumas made the relevant statement during the session of the Council of Ministers' Presidium on 18 December, BelTA has learned.
Sergei Rumas said: “A draft decision of the head of state has been prepared. It provides for appointing top government officials as representatives of the state in the most important joint-stock companies, which have a state share in their charter capital. The representatives are supposed to be elected chairpersons of the board of directors in these companies. The government will then make the relevant decision to select members of the Council of Ministers as representatives of the state. I believe that oblast governors could also head the supervisory board in one of the largest and troubled companies in the oblast. ”
The prime minister described corporate management as a vital instrument for ensuring the wise administration of joint-stock companies. It cannot resolve all the problems right away but persistent steps in this direction will allow wisely improving the administration of joint-stock companies bearing in mind their long-term development. First and foremost, it has to be done at enterprises of strategic importance. “Legislative conditions and other conditions for it have been created. However, not everything is smooth in practice. In a number of cases the system of administration of joint-stock companies with a state share is skewed,” pointed out Sergei Rumas.
The legislation requires supervisory boards in joint-stock companies to determine the strategy of development while directors are responsible for implementing the strategy and for running the company every day. The law does not allow transferring functions of the supervisory board to the executive branch. However, the system does not work in practice. Supervisory boards are made up of employees of the company, who are directly responsible to the director of the company. As a result, the supervisory board does not determine the company's policy. Instead the director's influence on members of the board allows the director to make virtually any management decisions. The supervisory board exists pro forma to back decisions of the directorate and makes no strategic decisions to improve the company's performance.
“Our experience and experience of other countries indicates that pouring money into a company without changing the management system from the side of the owner can result only in a short-term remission. It is necessary to start building a system geared towards reaching long-term goals. It is important primarily for major companies where management errors can be particularly costly,” stressed the prime minister.
Sergei Rumas also reminded that separating functions of the state as a regulator and as an owner is one of the most important tasks specified by the 2016-2020 national social and economic development program. “Ministries are supposed to enable conditions for the development of the relevant industries while representatives of the state are supposed to make state-owned assets effective. Decisions of the owner should reach every commercial entity with a state share via this channel. The execution of these decisions should be monitored via this channel as well,” he explained.
Getting independent directors involved in the work of supervisory boards was also discussed during the session of the Council of Ministers' Presidium. Those can be people, who are no longer civil servants, but have extensive management experience. As members of supervisory boards they can head key committees such as, for instance, development strategy committees.
While talking to reporters, the Belarusian head of government underlined the importance of improving the corporate management of companies with a state share in their charter capital. “Legislation clearly specifies how corporate management should work at any company. As a rule, the system works at major private companies. Functions of the state are virtually surrendered to the director at many state-owned companies. The classic management system does not work. Instead of amending the legislation it is necessary to bring the established practice in applying the law into compliance with common sense,” said Sergei Rumas. “We have a law on commercial companies. It does not need amendments. But it stipulates only basic principles for setting up bodies to run companies and only their core functions. The government believes it has to appoint competent civil servants representatives of the state in these companies.”
The prime minister said he believes that correctly operating supervisory boards can help fix financial problems of ineffective companies.
