THE LARGEST state-run and municipal companies in Slovakia suffer from a high degree of non-transparency, with most of their management positions changing according to the results of general elections – at least according to the report published by the political ethics watchdog Transparency International Slovensko (TIS).
TIS evaluated the companies using a grading system of A through E, with A being the optimal grade. The watchdog gathered the information from internet databases, companies’ websites as well as through direct inquiries with the companies, since they are required by law to provide free access to information to anyone who seeks it.
“State-run and municipal companies deal with the public finances and property of the state, and the public often learns about information regarding inefficient procurement or companies filling managerial posts with their ‘own’ people,” Ľuba Riapošová, a project coordinator of TIS, told The Slovak Spectator.
Yet, it is often difficult to control these companies, since they are not particularly willing to disclose the information.
“Basically, we do not know how state money is handled, because [the companies] refuse to undergo an inspection,” said TIS director Gabriel Šípoš, as quoted by the TASR newswire.
The criteria used for the evaluation was based on the companies’ willingness to provide information about their operations and financial management, as well as to publish contracts on the internet, and whether the ethical and internal rules of the companies are enforced.
The watchdog looked at 45 companies: 30 where the state has a 100-percent share, and 15 for which a regional capital owns a 100-percent share. As many as one third of the companies refused to provide TIS with information, reads the report.
Moreover, two-thirds of the companies failed to provide the watchdog with information about the salaries of members of their management or their curriculum vitae, while half the companies refused to disclose their contracts for cleaning services.
The results showed that the most transparent companies in Slovakia are passenger rail carrier Železničná Spoločnosť Slovensko (ZSSK) and public-service broadcaster Radio and Television of Slovakia (RTVS) which received about two thirds of available points and ended with a B grade, according to the TIS website.
On the other hand, the worst results reached local hockey club MsHK Žilina and Nitrianska investičná which had only one fifth of available points. Both received an E grade.
In addition to this, TIS found that many companies also have problems with internal ethics rules. Three out of four lack a code of conduct or a formal process to protect employees who try to report corruption. The only company which received the full number of points was ZSSK.
In its recommendations TIS advised the companies “to implement the public ethics code, including mechanisms for protection of whistleblowers, i.e. those who report non-transparent practices”. It also proposed to inform about conflicts of interests of supervisory or high management members in their annual reports.
Moreover, only three firms had internal rules of receiving gifts or allocating money for charities and various financial collections: state-run lottery Tipos, state-run heating plant Košická teplárenská and local company Letové prevádzkové služby Slovenskej republiky.
Generally speaking, the municipal companies received worse evaluations in the TIS list. The highest evaluation was received by Doravný podnik mesta Košice, which ended 3rd with a B- and Mestské lesy Košice which ranked 20th with a C.
“Municipal companies lag behind state-run companies in nearly every [assessed] area,” Riapošová said, adding that “the deficiencies of municipal firms compared to state-run firms are more significant mostly in terms of publishing their economic results”.
The only field in which the municipal companies achieved better results was publishing information about gifts, donations and contributions to charities, she said.
High rate of turnover in management
Managers of companies fully owned by state or local municipalities change in line with the results of general elections and are usually replaced within one year of the vote, which makes the companies unstable and forces them to focus only on short-term goals, the TIS report states.
Moreover, only about 10 percent of the managers in companies and their supervisory bodies’ officials hold their posts for more than one electoral term, which as a rule is four years, while the average length of tenure in managerial posts stands at just two years. In private companies, for example, the managers’ tenure lasts about three-times longer.
Additionally, while the private companies generally have six members in statutory bodies, in the state-run firms the number stands at eight.
“[These figures] indicate the political motivation in creating lucrative jobs in supervisory bodies over limits that would actually benefit the firms,” reads the report.
The highest degree of managerial turnover was observed at state-owned pharmaceutical company Biont and at the Military Maintenance Company in Nováky, in the Trenčín Region, where managers tended to be replaced after an average of only 15 months. Higher numbers of military companies might reflect weak economic results, as well as the frequent changes of the defence minister’s post, according to TIS.
On the other hand, at the Central Slovak Institute of Cardiovascular Diseases, Poprad Hospital and oil-pipeline system operator Transpetrol, 70 percent of its managers are likely to retain their posts even after a general election. One reason for this might be the necessity to hire qualified personnel for these positions, the report stated.
The report did not include information about the approximate term of managers in the statutory bodies of municipal companies, or the reasons for their departures, with Riapošová saying that the low number of companies that answered the survey prevented TIS from being able to prepare an appropriate analysis. Yet, she hopes to broaden analysis of this area in the future.
First recommendation adopted
“It seems that this issue has captured [the attention] of the organisations concerned, but also the rest of society,” said Riapošová when asked about the feedback to the TIS report, adding that the nature of the feedback mostly depends on how good, or bad, the company fared in the list.
One of the positive responses to the evaluation came from Economic Minister Tomáš Malatinský who adopted the idea of publishing managerial working agreements on the internet, the Sme daily reported.
“It is our effort to publish all contracts so as to prevent golden parachutes or inappropriate bonuses,” Stanislav Jurikovič, spokesperson for the ministry, told Sme.
Yet, the new rules will not include the old managerial working contracts since these people do not work for state administration anymore and possible inquiry might infringe upon the right to personal data protection, Jurikovič added.
Riapošová welcomed the intentions of the ministry, saying that they have not encountered any other ministries that were willing to adopt their recommendations. Yet, she hopes that they will gradually join the initiative.
“The main motivation should be a decrease in the number of scandals which harm both companies and ministries,” she added.
Not all reactions to the report are as positive as that of the Economic Minister. For example, Nitrianska investičná which landed the 44th position considers the results incorrect, reads the reaction published by TASR.
“The comparison of our company, which has two internal employees, one external employee and an average annual budget at €25,000 for salaries, payroll taxes and operation expenses, with companies which employ hundreds of employees with budgets several times higher [than ours] is tendentious and misleading,” said an authorised representative of the company Miroslav Ondrejička, as quoted by TASR.
He added that the company responded to all questions sent by TIS and that it fulfils all of the requirements of the evaluation, such as the reports over operation, management, donations and agreements, as well as the annual report which is published in the documents by the Nitra District Court.
Also the company Službyt Nitra, which ended 40th, disagreed with the evaluation, saying that TIS “was not interested in obtaining [more detailed information] about company; they sent us approximately ten questions without any explanation” for which they submitted the answers, the Hospodárske Noviny daily wrote.
Riapošová said that TIS has received information that some companies are not satisfied with their final grades, but adds that “these are mostly those which received lower grades.” She stressed that the watchdog applied the same criteria for collecting the information to all companies.
“The fact that a company responded to inforequest [i.e. the request submitted based on the law on free access to information] does not have to mean it will receive the points for submitted answers,” she told The Slovak Spectator.