Fondul Proprietatea (FP) representatives have expressed the concern about the further expansion of the “black list” of state-owned companies (SOEs) exempted from the corporate governance law, and considers this to be a step backwards in terms of increasing the quality of management in key SOEs.
“These exemptions will undermine the credibility of companies among foreign investors and will have a negative impact on the performance of the companies included on the list. If until now we witnessed a slowing pace in the implementation of corporate governance principles, or even a halt in it, these latest developments at Parliament level are undoubtedly a regression which could bring further significant damage to key SOEs. This is not simply just about principles; it affects state revenues and the citizens’ pockets,” Greg Konieczny, Fondul Proprietatea CEO and Portfolio Manager stated.
According to him, only taking into account the dividend from the companies in FP’s portfolio at this moment, it can be highlighted that the increase in dividend received by the Romanian state was almost 12 times, from RON 117 million to RON 1.4 billion. This was achieved in just five years, starting with 2011, when corporate governance was implemented, until 2016.
FP officials point out that the law on corporate governance is a crucial one as it aims to encourage the use of professional and politically-independent management as well as increased transparency in state-owned companies, with the final goal to improve their performance and overall economic growth for the country. “Romania has suffered in the past from the results of bad politically-connected management, generating considerable losses for various companies and industries,” they say.
In the case of CE Oltenia, the inclusion on the list of exemptions was voted following the unfounded claim that “corporate governance has not produced the expected effects, the management process being hampered, without suppleness.”
“We note that CE Oltenia is a clear example of a company that is in dire need of vastly improved corporate governance, in order to continue its growth pattern – from record losses in 2015, reduced losses in 2016 and a small profit in Q1 2017 – and which requires substantial efforts from all actors involved. The effects of the draft law as it is now will be extremely damaging for the long-term stability and development of the company. Moreover, exempting companies such as CE Oltenia, and others, from corporate governance will increase their financing cost, as banks usually require higher interest from politically-run enterprises,” Greg Konieczny said.
Also, this ‘black list’ and its expansion could play a major role in undermining Romania’s efforts to join the Organisation for Economic Co-operation and Development (OECD) and its capital market to be upgraded to emerging market status, CEO FP added.
“Thus, we particularly encourage the Chamber of Deputies to consider the harm that its vote could bring to companies such as CE Oltenia, but also, last minute additions to this ‘black list’ which are expected to include other companies from Fondul Proprietatea’s portfolio, where corporate governance, based on efficiency, investments and profitability are the rule,” Konieczny concluded.