Oleksiy Chernyshov, who heads Naftogaz, said the country’s largest fuel and energy company has changed for the good under his watch.
Last November Chernyshov was appointed CEO of the state-owned joint stock company.
In an exclusive interview with Kyiv Post, Chernyshov said he’s regained the trust of customers, international partners, and Ukraine’s Cabinet of Ministers.
Chernyshov, who has been predicted by some to be a potential candidate for prime minister should he show good results in his current position, is reticent about his career prospects.
However, he has no issue talking about his hopes for Ukraine’s future and the reforms he’d like to see.
In the first part of the interview with Kyiv Post, we talked about the corporate governance of Naftogaz and what international partners are seeking.
Recently, Washington published a list of reforms that Ukraine should implement soon to receive further aid. It mentions Naftogaz. Our allies are waiting for the appointment of the seventh member of the Naftogaz supervisory board. Currently, there are six, although the Naftogaz charter requires seven. Why do our partners have to remind us about the importance of appointing the seventh representative to the supervisory board?
I am very glad that you are starting this conversation on the topic of corporate governance and the application of the principles of the Organization for Economic Cooperation and Development (OECD) in state-owned enterprises.
In fact, at the beginning of this year, an important event took place – the members of the supervisory board were elected.
I am very happy about this because it was my first public appeal in this position to the Cabinet of Ministers – the appointment of the supervisory board and the selection of its representatives.
The board consists of four independent representatives and three from the state. The four independent members have been appointed. Two of the three from the state have been elected.
I want to assure everyone that the current composition is sufficient for our work and for us to make decisions.
The supervisory board is fully functional, and we’re approaching a year since its appointment.
However, for it to be completely staffed, one more person needs to be appointed.
This is a completely technical question. I am sure that the state will decide on a candidate and appoint them.
Why hasn’t the third representative from the state been appointed?
Possibly a suitable candidate hasn’t been selected yet.
Do you know if there are any applicants?
I do not.
However, the partners mentioned this in their list of requirements. Why do you think that is?
Because every task must be completed.
How often do our American and European partners, meeting with you, raise the issue of possible corruption in Naftogaz?
Naftogaz is the largest Ukrainian state enterprise – the largest state group of companies, especially in the energy segment.
The same questions arise concerning its work as arise for many other state institutions in Ukraine.
Therefore, we are in constant collaboration and communication with our international partners and the representatives of the G7 states. The issue of the need to promote urgent reforms in Ukraine is constantly being discussed and our side absolutely supports that.
As for the topic of anti-corruption measures and promoting the development of the law enforcement system that you mentioned – it is one of those important reforms that we, our country, the Ukrainian people, and the Ukrainian state must implement urgently.
Sometimes they ask Naftogaz questions related to reforms. We understand that Naftogaz is not an entity that can form an anti-corruption law enforcement system in the state.
Naftogaz can implement compliance control, anti-corruption procedures, as well as a whistleblowing system in the companies of the group. We did this and we are promoting it.
You didn't ask me this, but I'm going to say it. I am deeply convinced that Ukraine is at the point where it simply needs changes in order to have a chance to move to the next stage of its development. At the same time, this stage is possible only in a few years. I made this slide in March of 2022. The situation has hardly changed since.
Screenshot from the presentation.
What does it consist of? It consists of stages. We see three phases. The martial law phase. The phase of primary rebuilding. And the ‘Marshall Plan’ phase in different, relatively speaking, dimensions, namely – the economy, the centralization of state power, the promotion of reforms, international cooperation, etc.
For us to move on to the third phase (involving private international capital), the country must change completely. That is, we have to implement a significant package of reforms.
This is our challenge, and it must be done now.
If you ask, “When is it necessary to start?” “Is it possible to carry out reforms during the war?” There’s only one answer – it is necessary. It is necessary to start right now, today, including anti-corruption procedures, reforms in the energy market, the law enforcement system, justice, the economy, and decentralization.
Therefore, when you ask about anti-corruption measures at Naftogaz Group, it is a very key topic for me, because for years Naftogaz was considered an institution through which certain processes could happen, including political ones. I mean decades ago.
Therefore, any hint of this is simply unacceptable to me. The changes we are making in this matter are fundamental.
Has the supervisory already decided on how and when the competition for a new head of Naftogaz will be conducted?
The situation is as follows – the supervisory board is the body that must make decisions regarding the appointment of the company’s CEO, as well as the approval of financial plans.
Today's legislation, by which state-owned enterprises are regulated in the country, isn’t quite there yet. All state-owned enterprises are waiting for the adoption of a draft law on improving corporate governance.
As for Naftogaz, the supervisory board decided on the need to select candidates for the position of head of the board when it becomes possible in the future.
That is, there is an understanding that it should be done, but from the point of view of a specific timeline, no such decision has been made so far.
What should be the criteria for the future CEO?
According to the principles of the Organization for Economic Cooperation and Development, this should be determined by the supervisory board.
Today, it is obvious that the company has a legally appointed CEO.
Regarding the specific date for the competition, we must proceed from the military situation in the country, in the energy sector, and considering a hypothetical crisis.
Therefore, there are several factors here, but the important thing is that this issue is within the competence of the supervisory board. This is corporate reform.
You mentioned the draft law on corporate governance. Do you know when the law can be adopted in the parliament?
I know that it should be passed soon.
We hope that this will be done voluntarily by our MPs without further pressure from our partners.
You formulated it correctly. The most important thing is that Ukraine consciously accepts this initiative, believes in it, and shares these values, and does not do it under pressure.
Because in fact, this situation, these requirements, outpace the state's readiness and perception of the need for these changes.
Then we will understand that the supervisory board is needed not only to fulfill the requirements of the IMF, but also to make changes, to improve management – so that the company has a stable strategy and is not a hostage of political decisions or some other things.
This is what the supervisory board and independent directors are needed for, not just to check a box that some requirement is being met.
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