16.06.2026
Energy Club continues a special project dedicated to corporate governance in the energy sector of Ukraine. The focus is on practical aspects of the work of supervisory boards, the interaction of the state as a shareholder with company management, the implementation of OECD standards, and the role of corporate governance in attracting investments for the restoration of the energy sector.
As part of a special project, Energy Club journalist Olena Karpachova spoke with Maksym Nemchynov, Vice President of Energy Club, Deputy Minister of Energy of Ukraine in 2020–2021, former State Secretary of the Ministry of Energy and member of the first Supervisory Board of NPC Ukrenergo.
Having unique experience working simultaneously on the state side as a shareholder, management body and supervisory board, Maksym Nemchynov shared his own vision of why corporate governance in the Ukrainian energy sector still remains a difficult challenge. The conversation with the expert focused on the role of the state as an owner, the quality of the work of supervisory boards, the line between control and interference in the operational activities of companies, the impact of the war on the decision-making system, as well as how high-quality corporate governance today determines the willingness of international investors to invest in the restoration of the Ukrainian energy sector.
– Mr. Maksym, you have worked for many years in the system of state energy management – in the Ministry of Energy, as a state secretary, deputy minister and advisor to the minister. If we talk about corporate governance in the energy sector, where is the main problem today: in the legislation, in the role of the state as an owner, in the quality of supervisory boards or in the management culture?
– There is no problem in the legislation, because today everything is clearly spelled out in it and, in principle, our legislation complies with the OECD guidelines and best European practices as much as possible. The question is in its application. I believe that the absolute majority of reforms are not needed, we just need to comply with the current legislation.
If we talk about the role of the state as an owner, can there be a problem here? Such a problem can arise from time to time. The owner – the state or a private individual – always wants his vision to be a priority, and this is normal. The only question is whether the owner’s desire does not violate the norms of the law.
As for the quality of supervisory boards – sometimes it is the state’s desire to have more than is permitted by law that causes the temptation to appoint supervisory boards not according to the principle of a majority of truly independent members in its composition. That is, the quality of certain supervisory boards leaves much to be desired.
The biggest problem is management culture. It does not appear out of nowhere, it must be educated, cultivated, developed so that all parties understand what the principles of corporate governance are, what powers each party has. Because very often the heads of certain enterprises believe that the supervisory board is a body that serves them. The supervisory board should control the actions of the company’s management, but within the limits of its powers. And we need to develop a management culture and then, in my opinion, everything will be much better.
– At one time, you were a member of the supervisory board of NEC Ukrenergo. How did this experience change your understanding of the role of the supervisory board in a state-owned energy company? What works in practice, and what often remains only a formal structure?
– In fact, this experience is one of the most valuable in my career. I believe that we had a fairly strong supervisory board. It was one of the very first in the state-owned energy companies of Ukraine and the first in NEC Ukrenergo. We were engaged in corporatization. I already had a certain understanding of the role of the supervisory board, and in the process of work, some things became more obvious from a practical point of view – how it should work and how to do it.
In order to get the desired result, you need to clearly understand your role and your powers. Therefore, when asked what works in practice and what often remains only a formal structure, I can say: it all depends primarily on the composition of the supervisory board and on the understanding of the role and involvement of shareholders, owners, in this case, the state represented by the relevant ministry.
In principle, everything worked quite smoothly for us then. The supervisory board consisted of seven people: four independent members and three representatives of the state. All four independent members were expats, that is, not citizens of Ukraine. But they had a huge experience, we learned a lot from them, in particular corporate and management culture.
And we had an unspoken rule: it was mandatory to discuss all issues before putting them to a vote, and to work them out in committees, of which there were four in the supervisory board, and I headed one of them. We had an agreement to put issues to a vote with the unanimous consent of all members of the supervisory board. If someone was notsuitable – he had to explain the reasons in a reasoned manner. Of course, there were complex decisions, we prepared them for a long time, but in the end we found the necessary deep wording so that they would suit all members of the supervisory board and the shareholder. In my opinion, this is corporate culture.
– In 2018, commenting on corporate governance at Ukrhydroenergo, you said that for the Ministry it is the same challenge as for the company: you need to learn how to form an ownership policy, work with the supervisory board and correctly set tasks through the supervisory board. What has changed since then, and what problems have remained the same?
– Everything I said then, I can repeat now. Unfortunately, what I see today is no longer from the inside but from the side, from open sources, which is the basis for the conclusion: nothing has changed. It seems that everyone understands that they need to learn, a supervisory board is appointed, but no conclusions are drawn, the supervisory board says its own thing, the shareholder says its own thing, they haven’t learned how to set tasks correctly, how to divide areas of competence and write high-quality ownership policies that actually define these guiding principles for the supervisory board. We still need to learn this.
– So, eight years have passed, and nothing has changed? We don’t see any progress, and this is very strange. So, we are not developing in this direction?
– Unfortunately, I don’t have any positive examples. There are some supervisory boards that work more or less calmly and follow the shareholder’s path and don’t do anything special. There are those that, on the contrary, try to oppose themselves to the shareholder, and we saw such conflict situations last year. I won’t say now who was right and who was to blame, but, in principle, such situations should not exist. I see what is happening with the supervisory boards of NNEGC Energoatom and I understand that something is definitely wrong there, because members of the supervisory board are constantly being dismissed.
– Where, in your opinion, should the line be drawn between the legitimate influence of the state as a shareholder and manual management of a state-owned energy company? Which decisions should remain with the state, and which ones with the supervisory board and management?
– We can talk about theory, or we can talk about practice. We can talk about wishes, or we can talk about what is established by law.
First, if we are talking about the public sector and the state as a shareholder, as an owner and the Ministry of Energy as an actual representative of the state and shareholder, then first of all we should remember Article 19 of the Constitution, which establishes the fundamental principle of the rule of law and guarantees that no one can be forced to do what is not provided for by law, and authorities are obliged to act exclusively on the basis and within the limits established by law.
Therefore, all these limits are established by law. In order not to think about where this limit is and where manual management is, you just need to read the law and subordinate regulatory legal acts, understand where the powers of the shareholder are, where the powers of the supervisory board are and act accordingly. Then this question will not arise.
And in practice, if the law says that the appointment of a manager is the exclusive competence of the supervisory board, then the shareholder must form a vision of the company’s policy and make it clear to the supervisory board that the profile of the future manager is a competent, professional and in his place. And then the supervisory board must be responsible for the result that this person will give. And if he does not give, then the supervisory board is also responsible for this.
It also happens the other way around: the supervisory board tries to change at its own discretion what is within the exclusive competence of the shareholder. This is also wrong. I know examples when the supervisory board tries to shift responsibility to the shareholder and asks him to make a decision instead of him. But everyone should know their powers. The manager must understand that he does not manage the supervisory board, and the supervisory board does not form policy, but supervises and controls the company’s management and performance.
The shareholder tells the supervisory board what he expects from the company and has the right to ask the supervisory board and set KPIs for it. It is necessary to understand that the overriding right is with the shareholder, with the owner, who wants to get a result from the economic activities of his property. And in order not to interfere in the company’s operational activities, not to waste unnecessary time and not to create additional bureaucratic obstacles, the following structure is in place. The supervisory board must have at least two mandatory committees – the nomination and remuneration committee and the internal audit committee, with which it must actually control the company’s work. Then there will be much less conflicts. This is such a triangle, at the top of which is still the owner.
– In energy, the state is often the owner, regulator, policymaker and crisis manager at the same time. How can we avoid a conflict of roles in such a model and ensure that the company has a clear system of responsibility?
– The state, of course, can be both the owner and should be the regulator, and during war -also a crisis manager. But different bodies are usually responsible for all this. But the regulator in the energy sector is independent, which actually regulates market relations. It does not regulate economic activity. It can set economically justified tariffs, and this affects the owner’s expectations from the company’s activities. But there must be synergy here, that is, the state cannot simultaneously give different vectors and different messages to the company. If, for example, the ministry as a shareholder wants financial results from the company, then the company must work with the regulator and prove to him that for the implementation of projects and the fulfillment of the shareholder’s tasks, the investment program it needs sources, one of which are tariffs. And the regulator can check whether the requirements really meet the needs.
On this basis, conflicts arise, but from the point of view of responsibility, it is necessary to understand who the implementation of a particular decision depends on. If, for example, state bodies, the ministry, the regulator created the conditions, and the company did not fulfill them, this is a matter for the company. And if someone from the state blocked this decision, it is another matter.
– You have dealt with issues of the oil and gas sector, the coal industry and strategic energy enterprises. How should corporate governance take into account the specifics of companies that perform not only commercial, but also social and security functions?
– In fact, it is really difficult, and for the supervisory board, combining the commercial and social components is always a dilemma. For example, consider the PSO for gas or electricity, which are entrusted to one or another market participant. Although the laws stipulate that the state must compensate the company for the costs of PSO, this usually does not happen. In fact, for the company, this is a lost profit. That is, the state’s decision that the company will perform some social function usually leads to a deterioration in the economic and financial results of the company. And of course, the supervisory board must react to this.
But this is the decision of the state, as the owner. It decided that this asset of itss will perform a certain function. On the one hand, we are required not to interfere in the operational activities of companies, especially operators of the electricity transmission and distribution system, operators of gas transmission and distribution systems, and so on, and on the other hand, it is still the property of the state, which it can dispose of at its discretion. And if the state needs to perform certain social or security functions, then it, of course, has the right to assign them to the company. And supervisory boards must definitely take this into account. Only the shareholder decides how the company will develop and what functions it should perform. If at this time it is advisable to introduce a PSO for natural gas and supply natural gas to the population at a certain price, perhaps the state has certain reasons for this. Although, to be honest, I am against any PSO and for the monetization of subsidies for vulnerable categories of consumers.
Or, for example, the task of building protective structures at energy facilities. Of course, this must be done in order to secure the supply of electricity and natural gas. In my opinion, supervisory boards should take into account the leading role of the state as a shareholder in decision-making.
Although, of course, social decisions are very often quite populist, especially before elections, and harm not only companies, but also the state economy in general. But here it is necessary that voters understand this and be able to distinguish populism from correct economic decisions. This is the direct responsibility of voters.
– How to correctly assess the effectiveness of supervisory boards in state-owned energy companies: through financial results, quality of management control, risk management, ability to attract financing, energy security or other criteria?
– All of the listed criteria are relevant. Financial results are the main indicator of the company’s effective work. It can be in the short term and in the long term. If we talk about the company’s strategic development plans for years to come, then the financial result may be worse at the moment, but improve in the future.
The quality of management control is one of the main functions of the supervisory board. And the supervisory board should share responsibility for risk management with the company’s management, because many decisions are made by the manager or the board.
The ability to attract financing is also a consolidated responsibility of the supervisory board, the company’s management and the shareholder who forms the policy. As a rule, investors want to see profit, and when the company performs only social functions, profit is impossible.
Energy security is more the responsibility of the manager than the supervisory board. If we consider energy security in the context of the consumer, it is 100% only the manager.
I would add work with personnel to other assessment criteria, because, given the exclusive competences of the supervisory board and its mandatory committees on the appointment of remuneration and internal audit, most of the criteria have a basisbased on the analysis of the effectiveness of appointments, the quality of the company’s team’s work. And the criterion of the sustainability and stability of the team, which can qualitatively perform the duties and functions assigned to it, is one of the most important.
– In wartime, energy companies operate in conditions of attacks on infrastructure, resource shortages, and the need for quick decisions. Can martial law be a basis for simplifying corporate procedures, and where should the red line be drawn to prevent the rollback of the reform?
– Perhaps what I am about to say is not entirely popular, and reformers will hate me for it, but I believe that martial law is an absolute force majeure and has nothing to do with peacetime and a normal economy – of course, if we want to win the war. This implies that the structure of decision-making processes must be different. On the one hand, responsibility for decisions must be greater, and on the other hand, not all decisions in wartime can be effective or correct. Because, frankly, no one taught us to make quick decisions regarding energy in the hot phase of the war. And now the whole world is learning from our experience. Therefore, scolding someone or holding them accountable in the event of a wrong decision must be very, very carefully considered. Who can say that at that time it was possible to clearly predict which decision would be correct?
We need to prevent a complete vacuum and complete uncontrollability now, when people will be afraid to make decisions. Because this is a big responsibility. And, unfortunately, today many want to avoid it, because you can not make decisions and do nothing. People are afraid of responsibility.
Therefore, from the point of view of corporate governance, firstly, the state as the owner must have absolute priority during martial law, because only the authorities have the largest possible amount of information and can make the decisions necessary for the country in war conditions.
Secondly, we need to give more freedom to make decisions to people who are ready to make them in the conditions we are in now, and clearly understand that if this decision was justified at that time, even if it later turns out to be wrong, and was made in a legal manner, then we cannot tell a person – even a manager, even a member of the supervisory board – that he is guilty of something. Otherwise, we risk finding ourselves in a situation where no one simply wants to make decisions.
Regarding the red lines and the approach to forming supervisory boards – I understand that now the state needs supervisory boards more as a body that strengthens the shareholder and his leadership role. Because sometimes it is necessary to quickly implement decisions made by the state and military leadership without explanations and discussions, for which there is simply not enough time, and sometimes it is not even necessary to discuss and criticize, but simply implement, because these decisions are related to military operations and security.
Therefore, it is difficult to determine this red line. But, perhaps, here we can talk about the predominant role of independent members of the supervisory board. And if during the war the state forms the profile of the desired leader in a certain position not taking into account the existing knowledge and a certain vision, but giving preference to practical experience – for example, for critical enterprises that are close to the combat zone, then perhaps it is necessary to do so, with the understanding that today in war conditions the main task is to preserve enterprises, structure, functionality and teams.
– Ukraine needs large-scale financing to restore the energy sector, develop generation, networks, BESS, gas infrastructure and other areas. To what extent does the quality of corporate governance really affect the willingness of international financial institutions, donors and private investors to finance such projects?
– It affects very significantly. Investors want their money to be protected, so that the procedures for distributing and spending funds are clear, transparent and accountable. And for this, the principles of corporate governance must be clearly implemented. Corporate governance must be of high quality so that investors understand who makes decisions and how, who is responsible for them, how reporting is formed, submitted and approved, how profits will be distributed, etc. This is one of the key tasks and one of the main conditions for attracting investors.
– If we talk about the next 1–2 years, what three practical changes in corporate governance of state-owned energy companies do you consider to be the most important: a clearer ownership policy, strengthening the role of supervisory boards, transparent KPIs, depoliticization of appointments, management responsibility or something else?
– I will be consistent – first of all, it is a clear ownership policy, which should be a guide for the supervisory board.
Second: if we want effective companies that are focused on development and profit, including for the state, then this is definitely depoliticization of appointments.
We have already talked about responsibility: in conditions of war, on the one hand, it must be greater, because we want this war to end as soon as possible with our victory. But on the other hand, it is necessary that thisand responsibility was very specific for very specific actions. And it cannot be imposed for unintentionally wrong decisions in difficult situations, otherwise we will not get anything at all. Of course, transparent KPIs must be implemented, this is also very serious.
Strengthening the role of supervisory boards, in fact, is already foreseen and clearly defined by law, which simply needs to be implemented, finding the right synergy with the shareholder and with the company’s management.
I hope that the shareholder, the owner in the person of the state, will, on the one hand, be more meticulous about the members of the supervisory boards, and on the other hand, without interfering in their activities, be demanding, but within the limits of the law. Because today we have extremes when they either completely try to turn the supervisory board into a department of the ministry, or do not control its work at all. This is absolutely wrong. There should be synergy in the work between the shareholder, the supervisory board and the company’s management.
A conversation with Maksym Nemchynov once again proves: the key challenges of corporate governance in the Ukrainian energy sector today are not so much related to the imperfection of legislation, but to the quality of its practical application, management culture and a clear division of responsibility between the state, supervisory boards and company management. In conditions of war and large-scale restoration of energy infrastructure, it is transparent rules, professional supervisory boards, depoliticization of appointments and a clear ownership policy that can become the basis for increasing the efficiency of state-owned companies and strengthening the trust of international partners and investors in the Ukrainian energy sector.
