10 April 2020

How does state defence conglomerate Ukroboronprom (UoP) look like nowdays? 137 member companies, with only 27 of them having the annual revenue of more than $10mln. This being said, about 10 member companies produce 90% of the UoP revenue which was UAH 4.2 bln EBITDA in 2018.

Since NAKO was launched we have called for UoP to implement international corporate governance standards. Over the last more than half a year a lot has been done on the way of transforming the conglomerate to making it more effective and transparent. For instance, a ‘transitionary’ Supervisory Board is functioning and approved the corporatization strategy, the plan for financial restructuring of the member companies has been drafted, ownership policy has been developed, etc.

Now with the support of the United Kingdom’s Foreign & Commonwealth Office, a team of experts headed by Dr. Andriy Boytsun suggested to the State a new model of UoP corporate governance. The report also includes a roadmap to implement the necessary changes at the legislative level. The experts analyzed legislation and offered to annul at least 11 regulatory legal acts which influence the current way of governing the member companies, and to amend at least 15 laws, codes, rulings of the Cabinet of Ministers, and the strategic documents of the Ministry of Defence.

The detailed structure of the UoP corporate governance after corporatization (transformation to the government corporation) is suggested, performance indicators for the Supervisory Board members are defined, the system of compliance control is described, the principles of transparency and information disclosure are provided. The full version of the analytical report is available on Ukroboronprom’s website.

Since 2017 NAKO has advocated for assessment of the corporate governance and development of recommendations concerning the optimal model of corporate governance for the conglomerate itself and its member companies. The terms of reference which were developed with NAKO’s help became the foundation for one of the 3 lots of the international audit which was initiated but never started by the previous government. NAKO welcomes the fact that our recommendations to reduce corruption risks and increase transparency in the state defence conglomerate have started to be implemented now.

To prepare this material we have used the information of Ukroboronprom’s press service.

Author’s note: EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortization