SOEs’ Corporate Governance System Strengthened and Significantly Improved with Renewal of Three Major Governance Instruments
Ljubljana, 4 May 2023 – SSH has renewed three major governance instruments: SSH Asset Management Policy, SSH Recommendations and Expectations and Rules on the Assessment of Potential Candidates for Members of Supervisory and Management Boards of SOEs. SSH intends to renew the Corporate Governance Code for SOEs by the end of 2023.
“Establishing a well-functioning and robust corporate governance system is crucial for the successful operation of state-owned companies (SOEs). As a matter of fact, corporate governance system of good quality puts in place efficient mechanisms which aim to achieve long-term corporate value, financial and sustainable performance as well as other corporate objectives. In this regard, the high-quality and diverse composition of supervisory boards also plays an important role as it enables careful and responsible oversight of company operations. The criteria for accreditation and nomination of candidates for more demanding management positions have become stricter with these changes. In the future, SSH will pay even more attention to attracting additional competent individuals to its pool of accredited candidates, especially those who are underrepresented in terms of gender,” said the president of the SSH Management Board, Žiga Debeljak, MSc.
At the beginning of 2023, SSH initiated activities to update the aforementioned governance documents, as previously announced in the SSH Annual Asset Management Plan 2023.
The SSH Asset Management Policy is a legal document which presents principles, procedures and criteria which are observed by SSH in carrying out its duties and activities as stipulated by ZSDH-1. The document, which was partially amended last December due to the transfer of claims and assets during the merger with BAMC, has now been harmonized, restructured, supplemented, and comprehensively refreshed. The updated SSH Asset Management Policy also includes fundamental guidelines for SSH's voting at company general meetings, which were previously regulated in a separate document. The amendments to the document were approved by the SSH Supervisory Board on 4 May 2023.
Furthermore, the SSH Recommendations and Expectations have been supplemented, upgraded, and optimized. This document communicates SSH's recommendations and expectations to SOEs, regardless of the shareholding and the share of voting rights held by the State or SSH in an individual company. The companies are expected to comply with the recommendations based on the principle of “comply or explain”.
SSH has prepared the following new recommendations:
- Corporate Culture Governance: the aim is to encourage companies to develop a good corporate culture with the help of the “Governing Corporate Culture“ manual, published by SSH in February 2022 in collaboration with experts from the Centre for Business Excellence of the Faculty of Economics;
- Risk Management: companies are obliged to establish a risk management system and ensure its effectiveness and successful operation.
- Conclusion of Agreements on Early Termination of Management Board Members' Mandates, Employment of Management Board Members for Specific Period, Dismissal of Management Board Members, and Guidelines for the Preparation of Service Contracts for Performing the Duties of Management Board Members to Manage Certain Risks Related to Dismissals: this recommendation has been prepared on the basis of the recommendations of the Commission for the Prevention of Corruption (KPK), which regulates the procedures for company actions in the event of the dismissal of a management board member due to misconduct, and provides guidance on concluding agreements on the early termination of management board members' mandates. It also includes recommendations for service contracts to be concluded with the management board members in order to manage certain risks related to dismissals.
- Diversity, Equity and Inclusion (DEI) and Ensuring Balanced Gender Representation in Management and Supervisory Boards: the recommendation urges companies to set clear goals for promoting diversity, equity, and inclusion and expects competent company bodies to strive for balanced gender representation within management and supervisory boards by implementing appropriate measures.
Significant amendments have been made to the recommendations regarding the procurement of goods and services, as well as the remuneration policy for management bodies. The procurement recommendations cover contracts related to advisory and other services in the field of marketing, advertising, public relations, communication, and similar services As regards the remuneration policy for management bodies, SSH has sensibly considered the comments submitted by SOEs. New criteria have been established which are associated with the achievement of long-term (strategic) goals, reasons for (non)payment of severance benefits, and an additional recommendation has been added regarding non-competition clauses, among others. Procedures are also regulated in case when there is a need to deviate from the provisions of the Act Governing the Remuneration of Managers of Companies with Majority Ownership held by the Republic of Slovenia or Self-Governing Local Communities (ZPPOGD).
The revised “Rules on the Assessment of Potential Candidates for Members of Supervisory and Management Boards of SOEs” defines in detail the conditions, criteria, and procedures for evaluating and determining the suitability of potential candidates for members of supervisory and management boards of SOEs in accordance with the provisions of the Slovenia Sovereign Holding Act (ZSDH-1) and the SSH Asset Management Policy. These rules, together with the revised SSH Asset Management Policy, represents an important step towards a more transparent regulation of personnel procedures, which are now clearly defined, and enforce stricter nomination requirements, especially for candidates for supervisory boards of companies classified as “demanding systems” in terms of corporate governance (public companies, banks, insurance companies, and larger economic groups of companies). The completely revised concept of accreditation and nomination of candidates for management bodies will contribute to strengthening the quality of corporate governance at the company level.
SSH intends to further revise the “Corporate Governance Code for SOEs” by the end of 2023.