STATE-OWNED ENTERPRISES LACK OF INDEPENDENT SUPERVISION

June 14, 2011 4:49 PM

Independent supervision should be mandatory for government-owned entities

It has been my opinion for many years already that government-owned companies should be kept out of the political sphere as much as possible, so that they may benefit from a commercial, businesslike and market-oriented management. In doing so they also run less of a risk of being milked or used as political toys.

Recently, I commented on the model articles of association (statuten) drawn up for government companies by order of the country Curacao. They grant the shareholders meeting (i.e. the government) and the board of supervisory directors of the companies in question far-reaching powers. The most important power is that empowering the shareholders meeting to give specific instructions to the managing board, which the board must, in principle, observe.

Also, the politicians keep appointing their friends or other persons they consider loyal to their party instead of loyal to the public at large. As far as supervisory boards of government-owned enterprises are concerned, political appointees now even seem to run these enterprises.

Under the laws of Curacao, the main task of a board of supervisory directors is to supervise the board of managing directors of a limited liability company (NV or BV).

The Corporate Code provides for two different kinds of boards of supervisory directors, a “regular” board of supervisory directors and the so-called “independent” board of supervisory directors (Section 2:139 Curacao Civil Code). Within this context the word independent means that the supervisory directors are independent of the shareholders, interest groups (“belangengroepen”) and to a certain extent from the shareholders’ meeting.

An independent board of supervisory directors has its own responsibility and function without a mandate and/or without having to consult those who appointed them. They are appointed in the interest of the company, as such, and the associated companies, thus for the stakeholders in general.

According to the Explanatory Memorandum to the Curacao Corporate Code an independent board of supervisory directors is well suited for application in the financial sector. An independent supervisory board is also usually opted for for large companies. It goes without saying that such an independent board should be mandatory for government-owned or government-controlled entities.

An independent board of supervisory directors is subject to several strict statutory requirements while a “regular” board is more flexible in some respects. The requirement for having an independent board of supervisory directors is that it be mentioned as such in the articles of the company, with reference to the article of law, Article 2:139 Curacao Civil Code.

One final note. In 2005 the OECD issued the ‘Guidelines on Corporate Governance of State owned Enterprises’. According to the OECD:

“The State should act as an informed and active owner and establish a clear and consistent ownership policy, ensuring that the governance of the state owned enterprises is carried out in a transparent and accountable manner, with the necessary degree of professionalism and effectiveness”.

It is time for the government to act responsibly.

Karel Frielink
Attorney (Lawyer) / Partner

13 June 2011

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