Corporate governance reform in Ukraine’s defense industry has not progressed, according to the EU’s annual Association Implementation Report.
“The new Ukroboronprom agency head launched some important steps in this regard to reorganize the sector in line with OECD principles. He was dismissed, however, from his position in October. In parallel, in July, a new Ministry for Strategic Industries was established under a new Deputy Prime Minister who will take on management of all state owned defense industry enterprises,” the report says.
“In late 2019, the Ministry of Economy published a plan to align corporate governance practices in the largest ten State-Owned Enterprises (SOEs) with OECD principles. In the first six months of 2020, several actions had a negative impact on the reform. Several supervisory board members and chief executive officers were dismissed or were pressured to resign. This was followed by disincentives to independent foreign supervisory board participation through the imposition of e-declarations obligations, salary reductions and cap in line with those of government employees for the duration of COVID-19 quarantine measures. In October 2020, the Ukrainian government lifted the cap on remuneration of supervisory board members. EU macro-financial assistance and IMF programs require progress in several SOE corporate governance areas. Ukraine has applied to become an adherent to the OECD SOE corporate governance guidelines and on June 22, the OECD started the review of Ukraine’s framework. The findings will be available in one to one and a half year,” according to the document.
“The pandemic inevitably slowed down reform progress by deviating resources and political attention, while abrupt government reshuffles and changes to the personnel and management of state agencies added further uncertainty during this period,” it says.
