Due to non-existing policy towards companies jointly-controlled by the State it is not clear, which companies are to be held in the future
PRESS RELEASE on Audit No. 15/05 – December 14, 2015
The Supreme Audit Office (SAO) scrutinized the Ministry of Finance, the Ministry of Industry and Trade, and the Ministry of Agriculture and aimed at the exercise of shareholder’s rights in trading companies jointly-controlled by the State in the period from 2013 to 2015. Auditors focused on the implementation of rules related to policy on remuneration of top managers and members of organs in trading companies and selected 31 companies jointly-controlled by the State where the State’s shares amounted to CZK 106,000 million in total. The existing powers of the SAO do not allow to audit the management of these companies, performance of individual employment contracts, and benefits paid to member of management or supervisory boards.
Currently, there is no policy towards trading companies jointly-controlled by the State, which would allow to assess, in which companies the shares are to be held by the State in the future, i. e. which are seen as strategic assets and which are to be sold. The Government ordered the ministries in question to develop such a policy already in 2012 but finishing deadlines have since been postponed several times.
When scrutinizing asset management in trading companies jointly-controlled by the State, auditors found out many questionable facts. For example, representatives designated by the ministries are free of any supervision and may choose their own ways of promoting the State’s interests. The ministries can manage the selection of new candidates for representatives and only assess their previous experience and professional knowledge. At the Ministry of Finance, representatives are assessed based on general criteria and the Ministry did not set any rules for removing already authorised representatives.
The SAO criticized the existing rules for the authorisation of the State’s representatives. With the particular audited companies, the Government only issued a written delegation of the State’s rights exercise of their rights in two cases. With other – even more important – companies, the Minister alone decided on the delegation of the State’s rights. There are no rules for the cases when more than one ministry must delegate the State’s rights to representatives in one trading company.
Other errors were found in the area of remuneration of managers and members of organs in trading companies. In 2000, the Government approved regulations for clear establishment of remuneration principles, which the ministries should have followed, but which merely the Ministry of Industry and Trade fully implemented. The Ministry of Finance applied the said principles just partially – in practise, the remuneration was not abided by the condition that the company’s actions targeted any defined strategic goals or pursued the State’s interests.
The ministries also had to define financial limits for total annual income of the managers. However, the Ministry of Finance approved 14 out of the total z 22 contracts, which did not clearly set the maximum limit for benefits. With 15 contracts, the remunerations were not subject to the condition that the long-term objectives of the companies are achieved. These contracts did not define the specific part of wages, which would reflect medium-term objectives’ implementation, and which would be acquired after five years of service. This part of remuneration would make at least 30 % of the maximum annual income.
Communication Department
Supreme Audit Office