Analysts at the Ukraine Facility Platform have reviewed the government’s actions regarding Ukraine’s state-owned energy enterprises – an attempt to mitigate the governance crisis revealed by the «Mindichgate» scandal. This is a high-profile corruption scandal named after businessman Timur Mindich. Individuals linked to Mindich allegedly gained de facto control over Energoatom, the state nuclear power operator, enabling large-scale financial abuses, while the company’s supervisory board appeared unable to exercise effective oversight over emerging corruption risks.

At first sight, the government’s decision to reset the supervisory boards demonstrated political acknowledgment of the problem.

However, analysis at the Ukraine Facility Platform shows that the core issue is not the personalities of board members, but the continued practice of systematic manual, discretionary control over state-owned energy enterprises’ business activities.

As outlined in UAFP’s study, «Roots of Corruption in Ukraine’s Energy Sector», this practice undermines effective management and remains the major source of persistent corruption risks in the energy sector, especially in wartime.

UAFP examined whether the «post-Mindichgate» board reset has addressed these practices. The findings show that, despite some procedural changes, the underlying governance setup remains largely intact.

The state, through the legislator, says it is adopting best corporate governance practices. In practice, even after «Mindichgate», nothing has changed
Oleksandr Vizir
Sectoral leader for Energy & Climate

Regulatory changes were fragmented and incomplete, and corporate charters have not been harmonised across companies. Wartime «transitional» rules continue to allow non-competitive appointments, and selection processes remain vulnerable to conflicts of interest. Recruiters are still paid by the very companies they recruit for, leaving room for undue influence. The board member selection process lacks a strategic competency framework, leading to boards that are not capable of effective leadership. Frequent changes to selection regulations, combined with the manual management of board member appointments, are the main reasons for the appointment of unqualified board members.

The combination of these factors, unfortunately, leads us to conclude that the major source of persistent corruption risk remains intact.

The remaining risks should be addressed in line with the Organisation for Economic Co-operation and Development (OECD) Principles of Corporate Governance for State-Owned Enterprises.

UAFP recommends, inter alia:

  • creating a unified, transparent appointment system;
  • ensuring independent funding and rotation of recruitment firms;
  • formalising the role of international partners in nominations;
  • harmonising SOE charters across companies, including clarifying board decision-making powers and competences;
  • ensuring a competency-based board composition framework that provides oversight across the company’s critical functions and risks.
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