State-owned enterprises and the supervisory board experiment

Ukraine's state-owned enterprises have historically been a fiscal burden and a political resource at the same time. The reform attempted was governance rather than privatisation: leave the state as owner, but change how ownership is exercised.

The model

Independent supervisory boards, with a majority of members selected competitively and not answerable to the sponsoring ministry. The board appoints and dismisses the chief executive, approves the strategy and the budget, and stands between the company and the minister.

That last function is the entire purpose. The problem being solved is not incompetence; it is a company whose commercial decisions are made for political reasons — pricing, procurement, hiring, and who gets paid late.

What worked

Where boards were properly constituted and left alone, the results were real: audited accounts, professional executives recruited internationally, dividends actually paid to the budget, and procurement that stopped being a distribution mechanism.

Where it broke down

The recurring failure is not board incompetence. It is interference: boards dismissed when they made an unwelcome decision, appointments left vacant for long periods, mandates left unrenewed, powers narrowed by amendment.

Every one of those is reversible with a signature, which is the structural weakness of the whole approach. A board is only independent for as long as removing it is politically costly.

The lesson

Governance reform without a hard appointment and dismissal procedure is a convention, not an institution. It works while everyone chooses to respect it. Making it durable requires locking the procedure into law tightly enough that the cost of breaking it is visible to everyone — including to the international lenders who have consistently made this a condition, which has been the most effective protection the model has had.

Working with a state company I can tell whether the board is real from one thing: how long a management decision takes and who signs it. Where the board is real, a supplier knows who they are dealing with; where it is not, the decision goes somewhere different every time. Governance reform is that concrete when seen from outside.