OECD review on corporate governance in Lithuania: praise and recommendations
The Organisation for Economic Cooperation and Development (OECD) has published a review of corporate governance in Lithuania, in which Lithuania’s capacities, reform efforts and willingness to adopt the OECD standards and principles have been positively assessed. In the review, the OECD also made recommendations on how Lithuania could continue to improve this area in the future, a press release from the Ministry of Economy states.
'This survey shows that Lithuania has reached the targets of the best international standards in the field of corporate governance. Yet, following our joining the OECD, the reform of the state-owned enterprises will be continued in order to strengthen the state's capacity to formulate objectives for companies, ensure their transparency and more efficient management as well as higher return to the state', said Minister of Economy Virginijus Sinkevičius.
This review covers the assessment of the country's legal environment, the institutions that supervise companies and companies that are subject to the OECD Principles of Corporate Governance and the OECD Guidelines on Corporate Governance of State-Owned Enterprises. The review stresses that since 2015, when the invitation to launch the OECD process was made, Lithuania has consistently followed the recommendations made by the OECD in the area of company law.
The OECD experts welcome Lithuania's determination and capacity to apply the provisions which constitute the OECD governance principles and guidance in corporate governance; they also welcome relevant developments that have already been implemented in the context of restructuring state-owned enterprises. Most of the OECD's recommendations have already been implemented but the OECD plans to continue to monitor Lithuania's performance aimed to improve corporate governance.
One of the OECD recommendations is to give priority to the strengthening of boards of companies governed by the Law on Companies. In the area of state-owned enterprises, it is recommended to further strengthen the role of state ownership coordination and the independence of the boards as well as to improve the procedures for the selection of collegial bodies, continue the transformation of companies with the legal form of state enterprise into companies and continually seek that disclosure requirements be mandatory for large SOEs. It is also recommended to give up the provision concerning the executives' term in state-owned enterprises in the Law on Companies.
Further recommendations are aimed to ensure high governance and transparency requirements for merged forestry companies and road management companies.
In recent years, Lithuania has implemented a number of significant changes to improve efficiency in the governance of the SOEs. One of the most important steps include de-politicised boards and the increased number of independent members on the boards of SOEs. At the end of 2015, there still were 63 members of political confidence, and at the beginning of this year, there was no one already. According to data of June 2018, there are 113 independent members on the boards of the SOEs.
The Ministry of Economy is currently continuing to improve the regulation of the selection of independent members of the board. Consideration is given to the possibility of a model contract for the performance of independent board members and to the possibility to seek to standartise the regulation of remuneration for board members of state enterprises and companies. An increased efficiency and transparency of state-owned enterprises is expected to have a positive impact on Lithuania's overall economy.
In addition, a review of the legal forms of state-owned enterprises has been carried out and an actual reform has been launched: out of 118 state-owned enterprises 66 have remained, some of which will continue to be under reform or liquidation.
In order to make state-owned enterprises more transparent, to ensure more efficient management and increased return to the state, Lithuania plans to further strengthen the state ownership functions and to empower the Management Coordination Centre, which is responsible for coordinating the implementation of the governance of all state-owned enterprises. It is also planned to pursue the best way of optimising state-owned companies. All planned actions will continue to be evaluated by the OECD.
Lithuania officially became the 36th member of the OECD in early July. Membership in the OECD is recognised as the country's guarantee for economic stability and credibility and is taken into account when extending loans to governments or planning long-term investment. As the OECD member country, Lithuania will be able to use the latest OECD studies and the best practice of 35 OECD member countries to address specific economic policy challenges.