In order to strengthen the governance of SOEs, more active actions of the manager are also needed

Governance Coordination Centre (VKC) has completed consultations with state-owned enterprises (SOEs) regarding the improvement of governance and the practices applied this year. According to VKC head Vidas Danieliaus, a further significant leap in governance will be achieved only by centralizing SOE management and optimizing the entire SOE portfolio.

“This year, for the 10th year in a row, we have compiled the SOEs Good Governance Index. It is one of the main tools used to assess the qualitative aspects of SOE governance, but we did not limit ourselves to the preparation of an analytical report and this year we paid great attention to meetings with the managements of large SOEs, discussing the individual results of the Index. These meetings made it possible to refine both the fundamental problems of specific companies and the regulatory issues of the entire SOE sector,” says VKC director V. Danielius.

During the consultations organized by VKC with the top-level managers and chairmen of SOEs, comments and recommendations were made on how to improve individual areas of management, in order to achieve both a better evaluation of the Index and improvement of management. Managers’ approach to companies and other relevant and important issues of SOEs were also discussed.

“We are always encouraged to ensure consistent and regular contact between the SOE and the institution representing the state, as well as a close connection between the board and the shareholder. We understand and clearly see that good governance depends not only on the SOE management, but also on the manager. “Decentralized management not only does not solve, but only further deepens the problems of SOE governance, because some managers still have an irresponsible view of SOE governance and do not take timely actions, so we must focus on a faster step towards SOE centralization,” notes V. Danielius.

As early as 2021, the Government has approved the plan for the reorganization and management centralization of SOEs prepared by the Ministry of Economy and Innovation and already started to be implemented. It is planned that no more than 35 of the currently operating 47 state-owned enterprises should remain after the transformation. It is planned to assess the appropriateness of ownership of each SOE and to privatize SOEs performing commercial activities and competing with private capital companies. Some of the smaller companies will be merged or liquidated. It is also planned to transform state enterprises into legal entities of other legal forms – joint stock companies, closed joint stock companies, public institutions, etc.

“For some time now, we have started to implement OECD recommendations and guidelines for improving SOE governance. We see a tendency that some SOEs manage to comply with the transformation plan, especially when changing legal entities, while others have a more difficult time – and this largely depends on the shareholder’s contribution and the actions he takes”, VKC head V. Danielius emphasized.

The Governance Index compiled by the VKC contributes significantly to the governance improvement process. Each SOE is evaluated according to more than 260 criteria, responding to OECD recommendations, Transparency, Ownership, Selection guidelines and other documents regulating SOE activities and global best practices.

Learn more about the 2021-2022 The results of the SOE good governance index are available on the Governance Coordination Center’s website https://governance.lt/valdysenos-indeksas/#indekso-rezultatai .