CORPORATE GOVERNANCE IN STATE OWNED COMPANIES Ministry of the Treasury CORPORATE GOVERNANCE IN STATE OWNED COMPANIES THE POLISH EXPERIENCE Anita Ryng

State owned assets in numbers 1519 State Treasury corporations 0%-50% 967 50%-75% 61 75%-99% 38 100% 453 366 operating state-owned enterprises (in 113 privatisation advanced)

Institutions 1989 – 1996 Ministry of Privatisation 1996 - Ministry of the Treasury other ministries (Economy, Infrastructure, Environment, Culture) Privatisation Agency: 1997-2001 regional administration municipalities

Commercial Companies Code Special regulations in state owned companies Minister as owner Commercial Companies Code equal position to any other shareholder (organisation of the company, GMS, functions of Supervisory Board and management) Special regulations in state owned companies Act on Powers Vested in the Minister of the Treasury Act on Commercialisation and Privatisation

The role of the Ministry in the supervisory system Corporate supervision departments at the Ministry Participation in General Meetings of Shareholders Selection of State representatives on Supervisory Boards Communication with companies

Minister as shareholder Companies with 100% state ownership: Minister acts as the General Meeting of Shareholders State as a minority shareholder: representative of the Ministry participates in GMS as any other shareholder Detailed instructions for every agenda item

The role of the Ministry in the supervisory system Control and ownership functions in State companies exercised through Supervisory Boards Permanent supervision over the activity of the enterprise Selection procedures for State representatives at Supervisory Boards

Supervisory Board as an ownership control body Appoints members of the Management Board in the company and specifies their remuneration Monitors and controls MB decisions important for the company, evaluates the economic and financial situation of the company along with MB performance Enforces timely implementation of disclosure obligations towards the Ministry of the Treasury Grants the Management Board permission to make decisions of key importance for the company Co-operates with the auditor and monitors the auditing process

Communication between the Ministry and the companies Objectives: performance assessment of statutory bodies reaction to any negative developments launch of recovery activities System: questionnaires submitted by companies (financial situation of the company, remuneration policy, financial credibility, potential risks)

Communication between the Ministry and board members Corporate Governance Principles Annual guidelines for preparation of financial reports Regular meetings and training Annual performance assessment of SB members appointed by the Treasury „early warning” system protecting against potential irregularities collective information concerning performance of public sector entities available to the general public monitoring standards and mechanisms – a model solutions for all public sector entities

Minister of the Treasury Minister as a member of the government Annual reports for government and parliament on the performance of SOEs – on the value of state owned assets Privatisation Lines and Report on Privatisation

Centralised State ownership Minister – strong position in the government Uniform principles for management of state assets Conflict between supervision and privatisation Large number of supervised entities Necessity to co-ordinate economic policy with the Minister of Economy

State ownership versus tasks of the regulator Regulatory authorities – regulations binding for entire sectors, irrespectively of the form of ownership Energy Telecommunications Media Aviation Banking sector

Corporate supervision vis-a-vis tasks pertaining to privatisation Supervision and privatisation within one office No scope for conflict (rivalry) Temptation to maintain the status quo When to privatise? Which entities? Flow of information

State as owner - Corporate governance objectives operational effectiveness efficient management increased value of Treasury companies economic policies of the state effective privatisation transparency of Treasury companies

OWNERSHIP POLICY OBJECTIVES Result for policies of particular governments improved value of state entities restructuring (subsidies) privatisation establishment of ‘national champions’

OWNERSHIP POLICY OBJECTIVES Should be clearly defined Determination which entities will remain state-owned and why State sector: effective and transparent management Quality of service Public goals and polictical objectives