New system created should be efficient, transparent and clear

Issues of creating a new and efficient system of management were discussed at the President’s session dedicated to improving management of partially state-owned joint stock companies
By Vikenty Mikhailovsky

Alexander Lukashenko clearly explained the urgency of the issue, saying, “We don’t want a new bureaucratic superstructure which only interferes with the work of companies. Our system should be effective, benefitting the state and, primarily, the economy.”

According to the President, a new approach is long overdue. He noted at the session that efficient use of state property should be a priority for central and local authorities. He also underlined that he has repeatedly instructed the Government to improve management of its joint stock companies, saying that a drastic change is needed.

Belarus’ Prime Minister, Mikhail Myasnikovich, reported on proposals which aim to enhance the status of state representatives in open joint stock companies. State representatives are to be appointed in the same way as directors, with the President also giving input where companies are on his personnel register.

The Prime Minister suggested that responsibilities be redefined, with directors engaged in production strategy and the chair of the supervisory board overseeing general strategy. The issue aroused much debate, as Mr. Lukashenko doubts the efficiency of the plan, believing that two managers of equal status might compete with each other rather than co-operate. Moreover, he notes that multiple appointments would feed unnecessary bureaucracy. The efficiency of supervisory boards was also discussed in the same manner.

Further discussion revealed other disputable issues, with the President suggesting that the Government rethink the role of supervisory boards. According to the existing legislation, the latter are redundant where there’re no more than 50 shareholders but, for some reason, the public are enthusiastic about such boards, supporting them even for companies where the state owns 100 percent of shares. The President also suggested that state representatives should have a legitimate voice to protect the interests of minority shareholders, acting on their behalf. Instruction was given to settle legislative obstacles which reduce the efficiency of state possessory supervision, with the President demanding to improve the existing system rather than reinventing the wheel.

“The system of state property management is productive only if, firstly, joint stock companies deal with tasks of national importance, focusing on the socio-economic development of the country. They need to ensure food, ecological and information security rather than focusing on their narrow corporate interests. Secondly, companies need to operate with a good profit margin. Thirdly, they must respond promptly to changes in the market situation,” explained Mr. Lukashenko. The President regrets that so many problems are evident in this sphere.

The Head of State remarked that it’s good practice to hold Governmental sessions prior to the President making important economic and socio-political decisions. The current session aimed to discuss the management of state-owned packages of shares and ways of improving the possessory supervisory system, with a draft decree prepared.

“Complacence and an attitude of dependency are abundant even in companies in which the state owns the controlling interest. Supervisory boards fail to act, allowing directors to take all serious decisions. God forbid that we see a repeat of the recent situation of having to straighten out the confectionery industry, together with the governors of the Minsk and Gomel regions; the supervisory boards became an instrument of one dishonest businessman and, I believe, not free of charge,” asserted the Head of State.

He is disappointed in the way the state interacts with private investors in managing joint stock companies, saying, “They go beyond operating badly. Sometimes, state investors or state-appointed owners not only merge their interests with those of private businessmen but allow themselves to become an instrument for these private individuals (such as happened with the confectioneries). In other words, possessory supervision fails today to meet contemporary requirements; it needs radical improvement.”

The state currently owns shares in 1,738 open joint stock companies, with a state representative sitting on the supervisory board of each. “However, if we look at the quality of these representatives, we’ll see that they are not always of the right calibre. What then is their purpose?” notes the Head of State. He believes that state representatives should be more than ‘an eye of the Government’; they need ‘to be highly qualified professionals who can advise and take relevant decisions where problematic issues arise’.

The President remarked on the draft decree to improve the system of state property management and possessory supervision, refusing to accept that copying Western models is the correct path. He prefers to look at the Chinese system. “If you can’t create anything new, at least copy a ‘normal’ system — then adjust it to Belarus’ conditions. This isn’t the main point though; we understand perfectly well what kind of system we need. It should be precise and simple, avoiding bureaucracy. Otherwise, we’ll be creating another power vertical stretching from the President down to individual agricultural enterprises,” he continued.

“It’s certainly necessary to improve our current system but we don’t need total redevelopment. We need only to address specific aspects. If we have problems with some companies, or if major enterprises needing monitoring, let’s make decisions. If we have any, let’s appoint reliable state observers, who will bring benefits,” added the President. “It’s an important issue of company management in Belarus: I primarily refer to state, strategic and major enterprises.”
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