February 24, 2022, was the date that divided life into “before” and “after” for each of us. However, it is already clear that after the Victory, issues of trust in professionalism and integrity of Ukrainian businesses will come to the fore, as these are the virtues that are super important for partners, investors, and other stakeholders. Thus, providing a decent response to these three challenges – “to keep business”, “to work even in times of war” and “to be a professional and decent partner immediately after victory” – is the main challenge today for the supervisory boards of Ukrainian companies.
Are the supervisory boards coping with these challenges? You hear stories ranging from “Our Board disappeared on 24 February” to “Our Board moved into production”; from “they all hid” to “they saved us” and even to “they found new points of business growth”.
This and many other interesting observations were discussed by the participants in the Sixth Director’s Online Conference “Boardroom activities in times of war: impressions, observations, tips”, which was organized by the Corporate Governance Professional Association (CGPA) on 21 June 2022.
The main issues that have been discussed are:
Yulia Kholodkova, IFC Expert in ESG, Lead for IFC ECA ESG Program in Ukraine and Bosnia&Herzegovina, welcomed the participants and noted that the International Finance Corporation (IFC) is pleased to support its partners in implementing important tasks to support Ukrainian businesses in these very difficult times.
Andriy Boytsun, Ph.D., independent corporate governance consultant, Chairman of the Nomination and Remuneration Committee of the Supervisory Board of Ukrnafta, and former member of the Strategic Advisory Group to Support Reform (SAGSUR), said that despite conditions of total uncertainty, it was necessary to return to work planning and, in his view, this was the priority for all supervisory boards today. Mr. Boitsun stressed that the planning horizon had been shortened, which is very uncharacteristic of the usual activities of supervisory boards. Ukrnafta’s Supervisory Board has not ceased its work since February 24: several meetings of the Supervisory Board and its committees have already been held, and all members of the Supervisory Board are in touch. Many supervisory boards are more active now than before. Some competencies have come to the fore, such as personal international contacts, which were not required or presented in normal circumstances and have become increasingly active, especially in a crisis. Focusing on common goals helps companies, employees, and the country to survive difficult times.
Nadiia Vasylieva, Member of the Supervisory Board of CREDIT AGRICOLE BANK, an Independent Director, Member of the Supervisory Board of “Prozorro.Sales”, Independent Director, Head of Strategy Committee, Founder of Digital Transformation Institute of Ukraine, Chairman of the Supervisory Board, Independent Supervisory Board of NGO DNA, said that the activities of supervisory boards have changed not only in Ukrainian companies, but also in European companies due to the situation in Ukraine. N.Vasylieva pointed out that according to the results of the survey of CEOs of 1,500 companies worldwide in early 2022, only 7% of respondents said that their supervisory boards were highly effective during the pandemic coronavirus. And that was only because those supervisory boards had a well-developed risk management focus. Only 40% said they were prepared for the next challenges and major crises due to the effective performance of their supervisory boards. “Having recently analyzed the work on strategy and risk management, we have come to the conclusion that more attention needs to be paid to risks that have a low probability of occurring, but can have an extremely high impact on the company and have long-term economic consequences,” said Nadiia. The supervisory boards of the Ukrainian companies, of which N.Vasylieva is a member, have chosen to support people, i.e. to keep their jobs, as their priority. Therefore, the companies managed to avoid large-scale layoffs of workers. Nadiia also added that now the supervisory boards continue to work and hold meetings. One of the priority projects is to facilitate the relocation and renewal of Ukrainian businesses.
Taras Kirichenko, member of supervisory boards (2012-2022) of private and state companies and a private pension fund, raised the issue of the owner’s role in the activities of supervisory boards. The owner can become more effective, if he is certainly willing, then his role grows in the activities of the company and contributes to the effective functioning of the supervisory board. This also applies to state-owned companies, especially in a crisis, where the state starts to manage its companies more deeply. All owners act differently: some might dismiss the supervisory board as a body, while others might increase the workload of the supervisory board by requiring more expertise and competence from its members to run the company effectively. T.Kirichenko noted that almost all boards on which he is a member cooperate effectively with the management boards of companies and owners and hold joint meetings for the efficient resolution of issues and decision-making. International expansion – in exporting their products or services to the European market – is also on the boards’ agenda. “The main focus of the boards today is people, security, money, liquidity and multi-variant strategies,” T.Kirichenko pointed out.
Valentyn Gvozdiy, Chairman of the Supervisory Board of Ukrhydroenergo PJSC, said that the corporatization of Ukrhydroenergo has become a success story of corporate reform of Ukrainian state-owned enterprises. Over the past year, the company has become the most profitable among state-owned enterprises. Since the company is a strategic enterprise and all power generation facilities are of strategic importance, the company is prepared to face the crisis and risks. Even before the war, the supervisory board had been continually focused on testing its response to crisis situations, which contributed to the company’s efficient operation since the war began. The activity of the supervisory board can be defined as successful, as the company is launching new innovative projects even during the war – hydrogen production has started. In order to understand how to support the company’s management in difficult times, all members of the supervisory board take part in daily management conference calls and, if necessary, provide advice and help make quick decisions.
The moderator of the event was Oleksandr Okuniev, Chairman of the CGPA Management Board. Finally, Mr. Okuniev said that many issues had been raised, but much remained to be discussed, so the CGPA would continue to hold similar events, trying to support Ukrainian businessmen and board members who are looking for answers to the questions and challenges they face in the context of war and uncertainty.
The event was in cooperation with the IFC’s Integrated Environmental, Social and Governance (ESG) Standards Program in Europe and Central Asia, implementing with the financial support of the Government of Switzerland (SECO). The goal of the Program is to encourage and assist companies in adopting the best ESG and corporate governance practices, contributing to their ability to attract sustainable investments.
Video from the conference can be viewed: