Organized by Slovenian Directors' Association the conference took place in Ljubljana on September 23rd with major emphasis on the changed system of management of the State Owned Companies in Slovenia after joining OECD and on general assessment of the Corporate Governance in South-East Europe.

Corporate Governance of the State Owned Companies as a political decision

The process of joining OECD requested from Slovenia to establish an efficient legal framework for professional management of the State investments which total value is assessed to 6 billion euros. The State must firstly determine in which Companies, why and with what intent is the State presence good for. The objectives of the State ownership must be clearly determined, the State must slowly withdraw from the economy and maintain its investments only in the strategic Companies. But on the other hand, according to dr. Tajnikar, Corporate Governance of the State Owned Companies always was and always will be a politically motivated decision.

The new State Agency

The new law on management of the State's Investments constitutes a new State Agency which will independently govern the portfolio of State's Investments. James Colvin, responsible for examination of Slovenia in the process of accession to the OECD, underlines that the new Agency has to be a more transparent and responsible governor of the State Owned Companies. One of the main objectives of the Agency is to assure a centralized control of the State ownership and transparent decision-making – the ownership of the State's portfolio will no longer be spread to different ministries but will be fully governed by independent new Agency. It is essentially important to set strategic objectives of governance, which has not been done so far.

The entire process of adapting new governance requirements and OECD practices will be lengthy, but since we are not starting from the very beginning it should be shorter than in neighbouring countries (where it lasted for 10 – 15 years), but nevertheless things will not change overnight and by itself.

Supervisory Boards as a legal need

A large number of Joint Stock Companies and a lack of properly educated experts is a main feature and problem of SE Europe. Supervisory Board Members do not have necessary knowledge, are not aware of their fiduciary duties towards shareholders and do not act on their behalf. There are tendencies that elected Supervisory Board Members should protect only the rights of those shareholders who have elected them, which is totally against the basic function of the Supervisory Board – to protect and defend the rights of all owners, no matter who proposed and elected a certain Supervisory Board Member.

Connected to this issue is a question of independency of Supervisory Board Members. Ensuring independency is specially difficult in small economies, such as Slovenia and countries in the region. A solution could be in importing foreign experts, but they often lack knowledge and experiences of the local market. So it is elementary that the independence is ensured by knowledge, experience and proper remuneration of the Supervisory Board Members.

Supervisory Boards as well as Boards of Directors must be comprised of the best experts, who are appropriately payed and there for motivated to professionally perform their work. Bernard Pasquier, IFC representative in the Supervisory Board of Gorenje, states, that Board remuneration in State Owned Companies should be the same as in Private Companies or you will not get the best personel. Gross remuneration of 300 – 400 euros to a Board Member in State Owned Companies for every meeting attended is worrying and far from being in compliance with OECD guidelines and shows an underestimating attitude towards a responsible function.

Good Corporate Governance reduces the risk, improves competitiveness and efficiency and improves access to financial and human resources. We need good practices. Supervisory Boards must become our comparative advantage and not a legal need.

Foto: Mateja Jordovič Potočnik,

fotos are property of SDA