Electrica’s Board of Directors sent on to the Ministry of Energy Small and Medium Enterprises and Business Environment a letter to point out that “the Romanian State, through the Ministry of Energy, SMEs and Business Environment, as shareholder, wants to keep a firm grip on Electrica”. The letter comes one year after the Board of Directors of Electrica was elected by the General Meeting of Shareholders, following a successful listing of the company in Bucharest and London. The IPO diluted the state shareholding in the company below 50% and got over 444 million euro from the investors.
On August 20th, 2015, Electrica’s Board of Directors sent on to the Ministry of Energy to evidence four actions undergone by the Romanian state, which, in the signatories opinion, represent attempts from the state to keep a firm grip on Electrica, by interfering in the day to day operational activities of Electrica included.
1. KPI’s for the Board of Directors
The wish to introduce KPI’s for the Board of Directors, although this practice is not common in Western European Companies. In various official exchanges with your Ministry, we have learned that the main reason for introducing KPI’s for the Board is for the main shareholder to dispose of the means to dismiss the Board. In our view this is the wrong reason, as it results in an “us and them” attitude, which is based on mistrust between the Board and the shareholders, and is not perceived well by the market and the investment community. It also does not respect the rights of the minority shareholders.
2. Wish to be informed about the appointment process for executives
The wish to be informed about the appointment process for executives in the Company. According to the Articles of Association this is a clear responsibility of the Board of Directors and not of the shareholders, irrespective of their shareholding in the company.
3. Influencing the nomination process for directors
The fact that representatives of your Ministry have attempted to influence the nomination process for directors of the subsidiaries of Electrica. In order to make such nomination process fully transparent and independent, an external consultant would have to be used and any recommendations should be made via and judged by the consultant on the basis of a well-defined board profile and ultimately the candidates should be appointed by the Board of Directors. Such an independent process in currently being developed.
4. Request for multiple GMSs
It is common practice that a GMS takes place yearly and that the oversight of the Executive is left to the Board of Directors, as is clearly spelled out in the Articles of Association of the Company. Moreover, organizing multiple GMSs detracts management and the Board from running the Company in an efficient way and from introducing appropriate means for bringing Electrica faster in line with benchmarks of similar European Companies.
The Board of Directors’ initiative was communicated on September 9th, by releasing the letter on the company’s website.