Despite the authorities’ attacks on Naftogaz CEO Andriy Kobolyev, the supervisory board of the state gas monopoly offered him a three-year contract extension through January 2022. Naftogaz confirmed the offer to the Kyiv Post, but didn’t say whether Kobolyev accepted. The Kyiv Post couldn’t reach Kobolyev.
Although Prime Minister Volodymyr Groysman called Kobolyev’s salary unacceptably high, according to online publication Ukrainska Pravda, the CEO remains well-compensated.
In 2017, Kobolyev received $1.7 million in total compensation, salaries and bonuses. According to Ukrainska Pravda, the new agreement would pay Kobolev Hr 2.08 million ($77,065) monthly or $924,780 annually in base salary.
“The Supervisory Board has come to the conclusion that it’s in the best interests of the company to provide the needed measures in order to continue the work of the management, meaning to extend the term of office of the incumbent CEO,” the letter of Naftogaz’s Chairperson of the Supervisory Board Clare Mary Joan to Groysman, published by Ukrainska Pravda, reads.
However, Groysman announced on Feb. 28 that the government will not approve the contact because of management salaries that he says are two-to-three times higher than in other companies. “We will continue to work on introducing an entirely new level of transparency in Naftogaz,” the prime minister said on Feb. 28.
Kobolyev has been the CEO of the state-owned company since March 2014. Over these years, Naftogaz, which has close to $10 billion in annual revenue, has become profitable. In 2014, the company was losing up to $8 billion a year, while as soon as in 2017, Naftogaz made a net profit of $1.5 billion.
However, the Cabinet of Ministers led by Groysman is not satisfied. On Jan. 16, Groysman called on Naftogaz to lower Kobolyev’s salary. In the published letter, however, Joan says that Kobolyev’s pay matches the market rate. “We received assurances that the proposed salary level corresponds to the market,” the letter reads.
Groysman has also blamed Naftogaz for not meeting its domestic natural gas production targets of 27 billion cubic meters by 2020, instead of the current 20 bcm annually today – 12 bcm short of consumption. The recent firing of Oleg Prokhorenko as general director of UkrGasVydobuvannya, Naftogaz’s production arm, may be related to the stagnant production.
Kobolyev believes that his pay isn’t the real target of the authorities.
In an interview with the Kyiv Post, the CEO said that the salary issue has been politicized because of the upcoming presidential and parliamentary elections this year.
He also believes that the real aim of the officials may be to get rid of the supervisory board or constrain its powers.
In order to moderate the salary issue and put the spotlight on the importance of protecting the independence of the supervisory board, Kobolyev in January announced that he will donate his entire 2019 compensation, including salary and bonuses, to charity.
The supervisory board of Naftogaz was established in order to strengthen the governance in Ukraine’s top state-owned enterprises after the EuroMaidan Revolution that ousted President Viktor Yanukovych on Feb. 22, 2014. The members of the board were selected by the Cabinet of Ministers.
“This brings me to the conclusion that salary was not the object or major aim of this political request. Corporate governance was. What happens when supervisory boards are put under severe political pressure? They might resign. For Naftogaz, in a year of elections, the resignation of the supervisory board can mean a full reverse of all we have done so far,” Kobolyev said.
