Poland Seeks to Subordinate State Companies to Government Agenda

  • Minister wants new holding structure for state-run companies
  • New approach piles risk on minority investors: Bank Zachodni

Poland’s new government wants the managers of the biggest state-run companies to look after the economic interests of the country before those of the corporations they lead, Treasury Minister Dawid Jackiewicz said on Friday.

The government plans to move its stakes in some of the biggest Warsaw-listed state-run companies, such as PKO Bank Polski SA, insurer PZU SA, copper producer KGHM SA and chemicals maker Grupa Azoty SA, to a new holding structure by mid-2017, Jackiewicz said. Apart from what the ministry calls “more efficient” supervision, the new setup will also keep pressure on executives to follow orders from the government, even if the politicians’ demands don’t line up with their companies’ interests.

“We are placing new tasks for state-owned companies,” Jackiewicz told reporters in Warsaw. “They must carry out the interests of their owner -- the state treasury, not only their own company interests.”

Poland’s new government, celebrating its 100th day in office on Friday, has appointed ruling-party faithfuls to run strategic state-owned companies, increased levies on banks and sought to increase taxes on retailers as well, spooking financial-market investors. Warsaw’s WIG20 index has dropped 6.8 percent since it took power, compared with an 11 percent gain, in zloty-terms, of the MSCI emerging-market equity gauge.

Minority Rights

“The just announced plans are a phenomenon unheard of anywhere else,” said Pawel Puchalski, an analyst at Bank Zachodni WBK SA in Warsaw. “In principle, managements should work to build value of companies for all shareholders. After the minister’s comments, there is far bigger risk of decisions hurting the interest of minority investors.”

Jackiewicz said that no senior executive in a state-run company, even those picked by the new government, “can be calm about keeping his post” as the agenda of every supervisory board meeting will include a discussion about changing the company’s management “at any moment.”

“We must change the situation where the chief executives of state-owned companies treat them as their own kingdoms and don’t want to adjust to the government program,” he said.

The conflict has been especially visible in the energy industry, where managers of state-controlled utilities are reluctant to invest in the unprofitable coal mining industry, which is on the government’s agenda.

Poland’s laws prevent managers in both private- and state-owned companies from knowingly taking actions that would hurt the firms they oversee. Even though such regulations are rarely used, the government wants to find new “legal formulas” allowing executives to “take difficult corporate decisions,” Jackiewicz said. More details will be ready by March.

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