Fondul Proprietatea’s manager says that exempting state companies from corporate governance would be like letting Ali Baba’s 40 thieves into bank vault.
A new legal draft, currently discussed in the committees of the Chamber of Deputies, proposes the exemption of 100 major state-owned companies (SOEs) from the enforcement of corporate governance legislation currently in force, Franklin Templeton, the manager of local Fondul Proprietatea warns.
The amendments are largely the same as those declared unconstitutional by the Constitutional Court in February 2018. Some of the most valuable Romanian SOEs, operating in vital sectors, are targeted, including: Hidroelectrica, Nuclearelectrica, Bucharest Airports, Romgaz, Salrom, Constanta Maritime Ports SA, Transelectrica and CE Oltenia, where Fondul Proprietatea also holds minority stakes.
The plenum of the Chamber of Deputies may vote on the issue this week.
If adopted in its current form, the exemption of 100 state-owned companies from corporate governance would represent a major step back in terms of economic credibility, according to Franklin Templeton. The measure would have an extremely costly impact on Romanian SOEs, risking to transform them in mere black holes, due to the total lack of transparency and lack of accountability of their management; arbitrariness, incompetence and derision in appointing management, and their complete political subordination; and lack of control and public scrutiny over expenditures of SOEs, making them soft targets of corrupt politicians, the fund manager warns.
“We will most likely enter an era of total darkness in which we will no longer know anything about the performance of the SOEs, apart from learning a year or two down the road that some of the most successful Romanian companies, will then be on the verge of insolvency and we would be left wondering what happened in the meantime,” said Johan Meyer, CEO of Franklin Templeton Investments Limited and Portfolio Manager of Fondul Proprietatea.
“This would be similar to letting Ali Baba’s 40 thieves into a bank vault, switching off the lights and the alarm system and then pretending to be surprised at the outcome. I am amazed that such a detrimental action would even be considered in view of Romania’s objective of becoming an Emerging Market country,” he added.
Fondul Proprietatea urged the Parliament to carefully consider the major negative impact of these exemptions and decide against adopting this “infamous black-list of companies excepted from corporate governance”.
Franklin Templeton, who took over as manager of Romania’s largest investment fund – Fondul Proprietatea – in September 2010, has been pushing for the adoption of corporate governance principles in state owned companies.
The Emergency Ordinance 109 from 2011 which establishes corporate governance rules for all state-owned companies, was a major breakthrough for this sector. The ordinance, which was adopted at the request of the International Monetary Fund and European Commission, imposed the selection of the board members and managers in state-owned companies through a transparent procedure and periodic financial reports.
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