A Polish rock star. A patriot of Ukraine from France. An Odesa native with a master’s degree in business from a prestigious U.S. university.
Ukraine is hiring Western-educated CEOs for its top state enterprises in response to public frustration over continued public sector corruption.
Using a new hiring process, the Economy Ministry in late February announced open competitions for director posts at six state companies.
A nomination committee, with the help of headhunters and international organizations, has now picked three of the CEOs.
Three more executives — for the nation’s biggest national alcohol producer Ukrspirt, power generating company Tsentroenergo and national power grid operator Ukrenergo — are to be named soon.
Hiring CEOs in open tenders is a radical break from tradition in Ukraine, where state-owned companies have been run as cash cows for the political elites ever since the country gained independence in 1991. Under the control of political appointees, state enterprises generated private profits — and even took massive state subsidies — rather than generating revenue for the state budget.
The problem was highlighted by the resignation of Economy Minister Aivaras Abromavicius on Feb. 3.
As he announced he was leaving the government, the Lithuanian-born minister slammed the government of former Prime Minister Arseniy Yatsenyuk for tolerating corruption. He also claimed pro-presidential faction lawmakers were attempting to place their cronies in managerial posts at state enterprises under the Economy Ministry’s control.
Yatsenyuk responded with a promise to hold independent competitions to appoint new CEOs at the top 50 state companies.
Pole to head railways
The monopolist state railway network operator Ukrzaliznytsia is soon to be run by Wojciech Balczun.
Balczun, a Polish citizen, reformed his native country’s largest railway freight carrier, PKP Cargo, and prepared it for an IPO in October 2013. It then became the first stock-listed rail freight operator in Europe. During his five years in office from 2008 to 2013, Balczun turned PKP Cargo round from making a $26-million annual loss to a company earning more than $130 million annual profit (in 2011).
At the same time, Balczun continued playing guitar, recording albums, and giving concerts with his rock band Chemia (Chemistry).
In a post on Facebook page on April 12, he said taking over the running of the Ukrainian railway operator would be “the most difficult business task” of his life.
In his competition presentation, Balczun proposed to develop the high-speed railway network in Ukraine and open up the rail market to private carriers.
“Perhaps I will give fewer concerts, for obvious reasons, but (our group) will move forward and our love for music will remain unchanged,” Balczun said in a Facebook post to his disappointed Polish fans. “Take care, I will be fighting on two fronts.”
French CEO
Presenting Jean-André Barbosa, the candidate chosen to head Electrotyazhmash, Ukraine’s only manufacturer of high-power generators for thermal and nuclear power plants, Abromavicius called the French and Mexican passport-holder “a real patriot of Ukraine, who lives in Poland and is married to a Ukrainian woman.”
Barbosa has 17 years of experience in managerial positions in heavy engineering enterprises in Eastern Europe, CIS states and Ukraine. He is currently a vice president and regional director for Central and Eastern Europe at Areva, a French producer of nuclear and alternative energy equipment.
Barbosa said his key goals would be to bring the loss-making Electrotyazhmash into profit, find new markets for the company’s products, and introduce effective, Western-style management.
Ukraine’s postal service
The future CEO of Ukrainian state postal operator Ukrposhta comes to Kyiv from New York.
Igor Smelyansky, a native of Odesa, has 17 years of strategic management and financial consulting experience in big Western companies such as Boston Consulting and KPMG. Smelyansky also earned an MBA degree from Georgetown University in the United States.
Smelyansky said he was planning to review Ukrposhta’s tariff structure and service model, register a postal bank in Ukrposhta by 2017, and consider the privatization of a 25-percent stake in the company.
High caliber
Abromavicius said that the winners of the three competitions were professionals of a much higher caliber than previous state-company CEOs, who were mainly former state officials.
“This is a result of two factors: First, it’s because a market-level salary is on offer, and secondly, it’s because of the active involvement of headhunters, who were paid for with donor funds,” he told the press on April 12.
According to Roman Bondar, a headhunter from Talent Advisors who was on the team recruiting for the three state-company posts, there was no political pressure to appoint any of the candidates, which he said was a good sign.
“We looked for three qualities above all: zero-level tolerance for corruption, an impeccable professional reputation and proven experience in introducing changes,” Bondar said.
However, all of the new CEOs need to be approved by the government, and will need the support of parliament if they want to make any major changes.
In 2015, the government held competitions and appointed new executives at six state-owned companies, among them state bank Ukrgazbank, gas explorer UkrGasVydobuvannya, oil extracting company Ukrnafta, and the national operator of the domestic grain market, the State Food and Grain Corporation of Ukraine.
According to the Economy Ministry, losses at the 100 biggest state companies shrank by 17 times in 2015 compared to 2014, down from Hr 117 billion ($4.5 billion) to Hr 7 billion ($270 million).
Abomavicius said the improvement had been achieved merely through introducing proper financial reporting at the enterprises.
He said the three new CEOs are expected to deliver more effective management and bring the state companies they manage into profitability.
