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Political Interference in Naftogaz Supervisory Board Operations Is a Major Set Back in Corporate Governance Reform

Political Interference in Naftogaz Supervisory Board Operations Is a Major Set Back in Corporate Governance Reform

The recent Governmental decision to dismiss the Supervisory Board of NJSC Naftogaz of Ukraine for two days in order to make a decision on the dismissal of the Chief Executive Officer and its re-election in the same composition violates the principles of state-owned enterprises' corporate governance, disrupts the role of independent supervisory boards in Ukraine, and undermines Ukraine's agreements with the International Monetary Fund and other strategic partners.

Investors rely on independent corporate governance to protect their investment, and this threatens to jeopardize privatization, public-private partnerships, and any investment in state-owned enterprises (SOEs).

The business community, united by the American Chamber of Commerce in Ukraine (the Chamber), and the Ukrainian Corporate Governance Academy (UCGA), is deeply concerned about the decision of the Government with regard to the Supervisory Board of NJSC Naftogaz of Ukraine.

Drive Ukraine's energy independence with a fully liberalized energy market and reform state-owned enterprises' sector are among the highest priorities for the business. This can't be achieved without accelerating corporate governance reform and strengthening the role of independent supervisory boards.

We stand in solidarity with the U.S. Department of State that "respect for corporate governance, transparency, and integrity in energy sector personnel appointments - whether government or state-owned enterprises - is key to maintaining confidence in Ukraine's commitment to reform".

Good governance of SOEs is critical to ensure their positive contribution to Ukraine's economic efficiency and competitiveness. We are concerned by the setback in the SOEs corporate governance reform and the re-politicization of the process. A transparent and well-structured process for selecting candidates for supervisory board members, including government nominees and CEOs of state-owned enterprises, is essential for Ukraine's economic growth and investment attractiveness.

The business community calls upon President Volodymyr Zelensky, Prime Minister Denys Shmyhal, and the Cabinet of Ministers to completely reboot the corporate governance and SOEs reform effort in the nearest future and ensure independence of the supervisory boards.

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