Poland’s state-owned enterprises need genuine reform, not more politicking

The success of Poland’s corporate reforms hinges on the ability to strike a delicate balance between political pragmatism and institutional integrity.

Since Poland’s October 2023 elections, the country’s state-owned enterprises (SOEs) have undergone a dramatic transformation.

Under the stewardship of Borys Budka, Minister of State Assets, a sweeping overhaul has unfolded, marked by the wholesale replacement of supervisory and management boards and a concerted effort to purge politics from the leadership of these entities.

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This change is not just about restructuring; it is a bold step toward depoliticising key sectors of the economy. But despite these efforts, the shadow of political influence still looms large, casting doubt on the sincerity and effectiveness of these reforms. Instead of a true meritocracy, there remains the risk of perpetuating a system in which connections outweigh competence—a system which ultimately undermines trust and hinders progress.

In mid-April, the appointment of the new CEO of the Central Port of Communications, a key air and railway infrastructure project, marked the culmination of a series of changes within the company’s leadership, initiated back in January. This move raised the barometer measuring shifts in the leadership of major SOEs, as calculated by Rzeczpospolita, to 61.4 points.

However, despite this recent activity, the current score falls significantly short of the levels seen in April 2016. During that time, following the victory of the Law and Justice (PiS) party in the 2015 elections, the barometer reached 100 points. This surge reflected a wholesale turnover in CEO positions across all covered companies, with some appointees later replaced by PiS for the second time.

The shadow of political influence

At first glance, the move towards open competitions for leadership roles within SOEs appears laudable. By introducing qualification proceedings, Poland aims to prioritise professionalism and expertise over political connections—a step in the direction away from the murky realm of political favouritism. But despite this positive progress, doubts persist about the extent to which politics can be taken out of the selection process.

The shadow of political influence hangs heavy over Poland’s corporate world, making the supposedly fair reforms seem less clear-cut. Despite aiming for competence and fairness, there is a risk of behind-the-scenes deals and unfair advantages. This could shake trust in how businesses are run and decisions made, going against the core values of honesty and openness which make corporate governance work well.

Moreover, the idea of former executives returning to their roles raises questions about stability and lingering political ties. In a system where who you know matters more than what you know, the revolving door between politics and business could keep favouritism and unfairness going. Such practices not only erode trust in public institutions but also undermine investor confidence and stifle economic growth.

To navigate these treacherous waters, Poland needs to steer towards real change—one which prioritises competence over connections and merit over political patronage. This requires more than just surface-level reforms; it demands a fundamental reevaluation of the relationship between politics and professionalism in corporate governance.

The need for transparency

Key to this effort is the need for robust oversight mechanisms to shield state-owned enterprises from undue political interference. Hiding behind the facade of corporate governance is inappropriate, especially when it comes to selecting board members through seemingly competitive processes that seem tainted by political influence. This is particularly evident in cases where these contests are rushed, often resulting in the appointment of individuals with ties to past political administrations.

Take, for instance, the swift turnaround at the Tauron Group, a prominent energy company, where new board members were appointed within a mere fortnight of the competition’s announcement—well before the deadline for candidates’ interviews had passed. Such expedited appointments saw the return of familiar faces with previous affiliations to Tauron.

Transparency must be central, with clear criteria and procedures for the selection and evaluation of leadership candidates. Additionally, accountability mechanisms must be strengthened to hold decision-makers accountable for their actions, regardless of their political affiliations.

Ultimately, the success of Poland’s corporate reforms hinges on the ability to strike a delicate balance between political pragmatism and institutional integrity. While the path ahead may be challenging, the consequences of inaction are too significant to ignore. Continuing on this trajectory will only lead to further instability and erosion of trust—a price Poland can ill afford to pay.

In the end, the true test of Poland’s commitment to corporate governance lies not in rhetoric, but in the everyday decisions and actions that shape the conduct of its business leaders. Only by upholding the principles of professionalism, transparency, and accountability can Poland realise its full potential and chart a course toward a more prosperous and equitable future.

Photo by Iwona Castiello d’Antonio on Unsplash.

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