Ways to further improve Board member selection processes in the Latvian state-owned companies (SOEs) and the possibility to invite the Organisation for Economic Co-Operation and Development (OECD) to perform a review of overall Latvian progress since it joined the organisation were discussed at the meeting of the Latvian Prime Minister Krišjānis Kariņš and the Baltic Institute of Corporate Governance (BICG) on Thursday.
“Latvia is lagging behind Lithuania and Estonia more and more, including in terms of GDP growth and the income level of the population. It continues to chase after its neighbors, as it often ignores the principles of good corporate governance. Before joining the OECD, there was a positive shift in governance of SOEs, but now many signals suggest a “sliding back”, says Kārlis Danēvičs, Chair of the Board of the BICG.
As agreed during the meeting, BICG will shortly submit proposals for bettering corporate governance of SOEs, including practical steps on how to improve the selection process of Supervisory Board and Management Board members in the short term. At the same time, an assessment of an overall SOEs governance framework by the OECD could serve as the basis for a broader government action plan regarding further improvements.
“After the review by KPMG Baltics confirmed that the Management Board nomination process at the Latvian State Forests did not adhere to the best corporate governance practices, it brings a new spotlight on how the transparency and effectiveness of such processes can and should be improved”, says Andris Grafs, Vice President Latvia of the BICG.
Among other things, BICG suggests that the approach to defining qualification requirements for all Board candidates would be updated and that independent members of nomination committees would have collective veto rights as well as legal rights to publicly comment on the selection process, etc.