corporate governance in treasury companies

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Transcript corporate governance in treasury companies

CORPORATE GOVERNANCE IN
TREASURY COMPANIES
Paris, 26th June 2003
Starting point
- 12 years of Polish privatisation

Year 1990
approx. 8,500 state
enterprises

Year 2002
1,800 Treasury companies
and state enterprises

31% of GDP generated by
the private sector

72% of GDP generated by
the private sector

40% employed in the
private sector
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70% employed in the
private sector

Foreign Direct Investment
- USD 105 m

Foreign Direct Investment
- USD 56, 834 million USD
Mission
Completion, by 2006, of the Polish economy’s
core transformation processes, resulting in the
ownership structure similar to that of EU
Member States, where the share of state assets
remains at the level of between 10% and 20%.
State owned assets in
numbers
• 606 State owned enterprises (SMEs)
(in 113 privatisation advanced)
•1704 State Treasury corporations
0%-25%
715
25%-50% 438
50%-75% 61
75%-99% 38
100%
452
Largest state-owned companies
Company
Employment
Proceeds
Profitability
(in mln PLN)

PKO BP
37667
9,05
15,9
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PGNiG
26351
9,36
4,7
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Katowicki Coal
Holding
Jastrzębska Coal
Company
KWB Bełchatów
24633
2,7
2,6
20487
2,3
0,1
9758
1,3
4,8
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Largest state-owned companies
Company
Proceeds
Employment
Profitability
(in mln PLN)

PSE
15,12
517
0,3

PGNiG
9,36
26351
4,7
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PKO BP
9,05
37667
15,9
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Węglokoks
3,95
24932
0,9
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RUCH
3,82
7254
0,5
State owned enterprises and companies
covered by privatisation process by
financial performance in 2002
Groups of entities
Percentage of
companies with
net profit
Percentage of
companies with
net loss
State owned enterprises
39.5
60.3
2
Sole shareholder companies
of the Treasury
47.2
52.8
3
Companies participating in
the NIF programme
Companies privatised
through indirect method
(capital method)
46.7
53.3
58.5
41.5
Employee-owned companies
67.1
32.7
State owned enterprises
being privatised through
direct method
17.6
82.4
1
4
5
6
7
Economic indicators of state owned
enterprises and companies covered by
privatisation process in 2002
Groups of entities
Costs ratio
(%)
Net profitability
ratio (%)
Liquidity
ratio (%)
State owned enterprises
100.9
- 2.0
33.0
2
Sole shareholder companies
of the Treasury
101.9
- 2.4
11.7
3
Companies participating in
the NIF programme
Companies privatised
through indirect method
(capital method)
101.8
- 2.4
10.5
97.9
0.5
26.7
Employee-owned companies
98.0
0.9
25.9
State owned companies
being privatised through
direct method
103.3
- 3.5
4.5
1
4
5
6
State in the economy
The volume of state assets and their significance
for the national economy define the weight of
responsibility imposed on persons who are
entrusted with management of those assets, as
well as responsibility of the government
administration representatives who appoint
those persons.
Corporate Governance Model
The issues discussed in this presentation
constitute contributing elements of the target
corporate governance model for companies in
which the Treasury holds shares.
The presented solutions :
- have already been implemented;
- their implementation is at the preliminary stage;
- will be implemented in the near future.
Corporate governance objectives

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Increase of operational effectiveness, management
efficiency and the value of Treasury companies;
Rational application of state assets in order to ensure
proper functioning of the national economy;
Effective use of Treasury ownership rights to pursue
economic policies of the state;
Conducting effective privatization in order to facilitate fast
and efficient transition to the desirable ownership
structure;
Achievement of transparency by Treasury companies
comparable with that of listed companies (strict
disclosure standards]
Corporate governance objectives
– continued
Implementation of the above-mentioned objectives should be
assisted by:
 strengthening of the supervisory board’s position through
more comprehensive application of its rights, in
accordance with the Polish commercial companies code;
 ensuring professionalism of supervisory boards’ members;
 adoption of new financial monitoring standards by
companies;
 intensification of co-operation with the auditor by
companies’ bodies (General Assembly/General Meeting,
Supervisory Board, Management Board);
 strengthening of the Ministry of the Treasury’ position
and control effectiveness over companies.
Supervisory Board as an ownership
control body

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
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Appoints members of the Management Board in the
company and defines their remuneration proportionally to
their performance;
Analyzes and issues opinions concerning company
development plans;
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;
Promptly reacts to any discovered irregularities;
Grants the Management Board permission to make
decisions of key importance for the company;
Co-operates with the auditor and monitors the auditing
process;
Financial monitoring of companies

The monitoring system for companies in which the
Treasury holds shares must allow not only assessment of
its statutory bodies’ performance but also the ability to
react promptly to any negative developments, as well as
the ability to launch recovery activities;

The monitoring system is to be based on questionnaires
submitted by companies. The scope of disclosure will
depend on the company’s status (sole shareholder
companies of the Treasury, companies with strategic
investors, companies with Treasury majority stakes,
companies in which the Treasury holds residual interest);

The Ministry will elaborate detailed guidelines for each of
those groups indicating main supervisory tasks;
Financial monitoring of companies
– continued

The monitoring system is to enable fast elaboration of
synthetic analyses and establishment of an „early
warning” system protecting against potential
irregularities;

Collective information concerning performance of public
sector entities will be made available to the general
public;

Uniform economic & financial situation monitoring
standards and mechanisms elaborated by the Ministry of
the Treasury will be model solutions for all public sector
entities, irrespectively of which state authority supervises
a given entity.
The auditor’s role in the supervision
system of Treasury companies

The auditor should be independent and impartial. Audit
and advisory services must be kept apart;

The whole auditor selection procedure will be conducted
by the Supervisory Board;

The Supervisory Board submits its comments concerning
issues important for the functioning of the company to
the auditor and actively co-operates with him at all stages
of the audit;
The auditor’s role in the supervision
system of Treasury companies - continued

The Supervisory Board abides by the principle of
compulsory auditor rotation;

The chartered accountant who audits the financial
accounts of the company should be obliged to attend the
General Assembly / General Meeting, providing the
remaining attendees with relevant explanations and
information;
Under the framework of the „early warning system”, the
Supervisory Board should have the ability to take
advantage of advisory services provided by an
independent chartered accountant in the course of the
accounting year.

The role of the Ministry of the
Treasury in the supervisory system

The key role is played by corporate supervision
departments. They perform a number of organisation,
administrative and, above all, supervisory tasks as
regards Supervisory Boards in companies.

The main task of the Ministry of the Treasury is thorough
control and comprehensive evaluation of Supervisory
Boards’ performance.

An important issue is ensuring an optimum composition
of Supervisory Boards. Selection of appropriate persons,
knowledgeable and experienced, guarantees proper
fulfilment of tasks by the boards.