30.06.2026
Energy Club continues a special project dedicated to corporate governance in the energy sector of Ukraine. In a series of interviews with leading Ukrainian and international experts, we discuss how to build an effective management model for state-owned energy companies that meets modern standards and strengthens investor confidence.
Volodymyr Ihonin – partner, head of corporate practice at Vasil Kisil & Partners Law Firm, member of the Board of Directors of the Professional Association of Corporate Governance – in an interview with the Energy Club media department told how to distinguish real corporate governance from its imitation, what the role of the state as an owner should be, by what criteria to evaluate supervisory boards, what steps are necessary to strengthen trust in state-owned energy companies, and what changes are key to successful corporate governance reform. They also talked about ways to avoid manual management of state-owned companies and solutions that can increase investor confidence.
– Mr. Volodymyr, you have been working on corporate law and governance issues for many years, participated in the development of the Corporate Governance Code and the State Property Policy. If we evaluate the Ukrainian energy sector, where is the main problem today: in the legislation, in the practice of its application, in the role of the state as an owner, or in the management culture of the companies themselves?
– Over the past few years, Ukraine has significantly modernized the legal framework of corporate governance. This is confirmed by the latest assessments of the OECD. The main problem today is not so much in the legislation, but in the consistency and culture of its application, as well as the effectiveness of the state as an owner. In Ukrainian practice, there is a widespread misconception that it is enough to create a supervisory board and the company should instantly become effective. I call this “corporate paternalism.” In fact, corporate governance is not a separate body, but a whole system of checks, balances, accountability and control. An independent supervisory board is a critically important element that ensures the effectiveness of this system, but it is far from the only one.
If we formulate the main conclusion in one sentence, then today Ukraine needs not so much new corporate governance rules as consistent implementation of the already adopted ones. This will be the main test of the maturity and effectiveness of the state as an owner.
– Corporate governance is often perceived as a formality: a supervisory board, committees, policies, reporting. From a legal point of view, what distinguishes a real corporate governance system from its imitation?
– The corporate governance system is imitated not when the company does not have a supervisory board, but when the board exists, but its influence is extremely limited. Formally, all the necessary bodies, committees, and policies may exist.
Imitation is a ceremonial supervisory board “for show.” Such a board includes people loyal to the owner without real powers. They formally “take note” of management reports and from time to time give him visionary instructions. Real key decisions are made outside the established corporate governance system. It is obvious that such a model does not fulfill its function.
The main legal criterion for an effective board is not the presence of committees and policies, nor even the competence of members, but the actual execution of its powers by the board. The supervisory board must independently appoint, evaluate, and dismiss the manager, approve the strategy, financial, and investment plans, and ensure the effectiveness of the internal control, risk management, compliance, and internal audit systems. A separate challenge for board members is to act in the interests of the company, not the person who appointed them.
The events surrounding Energoatom after the Midas operation was exposed showed how weak corporate institutions manifest themselves. It would be an exaggeration to claim that a strong supervisory board would have guaranteed to prevent the revealed abuses. However, it is the board that must ensure independent control, internal audit, and active (rather than formal) risk management.
OECD practice shows that the combination of an independent supervisory board, effective internal control, and an effective compliance system creates an environment in which it is more difficult to hide violations and easier to detect them in a timely manner. This is precisely whyIn February 2024, the Law on the Management of State-Owned Objects was updated. The changes strengthened the supervisory boards of state-owned companies and introduced modern tools – compliance, risk management and internal audit – instead of archaic audit commissions (which operate retrospectively).
– In the energy sector, the state is often simultaneously the owner, regulator, policymaker and crisis manager. How can these roles be legally correctly separated in order to avoid conflicts of interest and manual management of companies?
– This combination of roles does create risks. One of the main principles of OECD corporate governance is the separation of the state’s function as an owner from the functions of a regulator and policy maker. This principle is also enshrined in the State Property Policy, which the Government approved in November 2024. In practice, this means that the body that sets tariffs and market rules should not simultaneously manage a company operating in this market. Now this legal principle needs to be put into practice.
Specific solutions – professionalization of the owner’s function: transparent formation of supervisory boards, objective assessment of their activities, definition of clear expectations of the owner.
A separate major goal is the transition to a centralized model: today, state-owned companies are managed by about 80 different bodies. State property policy provides for the creation of a single management structure that consolidates management expertise and will act as the owner for the portfolio of companies. This is not a Ukrainian invention. World practice shows that depoliticizing the owner function does not reduce state control (which is often feared), but makes it more professional and predictable.
Of course, we cannot ignore the realities of martial law. Russian aggression sometimes requires a crisis approach and deviations from peacetime procedures. But objectively necessary exceptions should not become the new norm.
– Where, in your opinion, is the line drawn between the legitimate influence of the state as a shareholder and improper interference in the activities of the supervisory board or management of the company?
– The state as an owner has the right to determine what it expects from its company, but should not determine how exactly to achieve these results. The state establishes the results expected from the company (financial, non-financial, operational) in a special document – the letter of expectations of the owner after mandatory consultations with the company’s supervisory board.
Having approved the letter of expectations, the state should not interfere in the operational management of the company, even under the guise of ensuring the achievement of results.
This approach is enshrined in the State Property Policy as the principle of operational independence and protection from interference. It consists of two parts:
1) The supreme (state) governing body should not interfere in the affairs of the supervisory board or the management of the company, unless such an issue is the exclusive competence of the supreme body, and
2) The supervisory board should avoid excessive interference in the operational independence of management.
The practical task is to separate excessive interference from justified interference. and useful when the processes really require active participation of the board. Otherwise, instead of excessive intervention, we will get harmful passivity.
– Ukraine is moving towards OECD standards in the field of corporate governance of state-owned enterprises. Which of these standards are the most critical for energy companies, and which are the most difficult to implement in practice?
– The fundamental principle of the OECD and the critical standard is the state’s awareness of why it owns a particular company at all. Having answered this question, the state should conduct the so-called “triage”: sorting enterprises into (i) those that should remain in state ownership as strategic, (ii) those that are going to privatization or concession, and (iii) those that are subject to liquidation.
The next step should be to conduct such a review of the state portfolio of companies. Let me remind you that there are about three thousand state-owned companies in Ukraine. Of these, theabout a third are profitable, and less than 18% are profitable. The rest absorbs financial and managerial resources. Without triage, the state disperses resources and cannot be a professional owner for truly strategic companies.
In the energy sector, ensuring competitive neutrality is a particular challenge. In Ukraine, unbundling allowed the separation of gas transmission system operators (“GTS Operator of Ukraine”) and electricity grids (“Ukrenergo”) into separate companies. This separated the monopoly infrastructure from competitive market segments to ensure equal access for market participants.
Another challenge is special obligations (PSO). The state assigns social functions to energy companies, but at the same time expects them to work according to market principles and profitability. Such goals can be combined only on the condition that non-commercial functions are clearly defined, transparently accounted for, and compensated by the state. It was the opaque PSOs that generated billions in losses for Naftogaz for years. Its recovery became possible when the state combined market tariffs with a transparent model of compensation for special duties.
– Supervisory boards should be independent, but independence without responsibility also creates risks. What should be the legal liability of members of the supervisory boards of state-owned companies?
– By law, members of the supervisory board, together with management, are company officials. They have fiduciary duties – they must act exclusively in the interests of the company, in good faith and reasonably, within the limits of their authority and in a manner that will contribute to achieving the company’s goals, avoiding conflicts of interest.
A breach of fiduciary duties by an official can cause losses for the company. For example, a board member in a conflict of interest facilitated the conclusion of a contract with a related party at a price significantly higher than the market price. In such a case, the company’s losses must be compensated by the offending official. This general rule is enshrined in Ukrainian legislation. And there is a case law that holds officials liable for damages caused to the company.
There are also special safeguards. For example, if the supervisory board does not escalate a critical deterioration in the company’s financial performance to the owner level in a timely manner, after which it goes bankrupt, the board members may be subsidiaryly liable for the debts of the bankrupt company.
Therefore, membership in the supervisory board is not a sinecure, but a professional function that involves real legal obligations, personal responsibility, and willingness to be responsible for the consequences of one’s actions or inaction.
– How to correctly assess the effectiveness of the supervisory board: through financial results, quality of management control, risk management, compliance, anti-corruption mechanisms, strategic decisions, or other criteria?
– Certainly not only by financial results. First, it shifts the focus of the supervisory board to short-term financial indicators and can stimulate support for decisions aimed at quick profit at the expense of the company’s long-term sustainability. Second, state-owned energy companies often perform special duties or operate in extremely difficult, including wartime, conditions. Therefore, financial results are by no means the main criterion for the board’s effectiveness.
How to evaluate then? The effectiveness of the supervisory board is determined by the extent to which it ensures the achievement of the company’s long-term goals, set out in the owner’s list of expectations, exercises proper control over management, and ensures effective risk management.
Ukraine has already moved from declarations to practical assessment mechanisms. In January 2025, the Government approved the Procedure for Evaluating the Activities of Supervisory Boards of State-Owned Companies. The document regulates the annual self-assessment of supervisory boards of companies, as well as their independent external assessment at least once every three years. It is significant that for the first time this mechanism was applied to the supervisory boards of the largest companies in the energy sector – Naftogaz, Ukrenergo, and the GTS Operator of Ukraine. This shows that the reform is moving from the formation of rules to their practical application.
It is important that the result of the evaluation should be not only a report, but also a specific action plan with responsible persons. Only then does the evaluation become a development tool, not a formal procedure.
The procedure for evaluating councils needs to be improved, but it is important that the mechanism itself is launched. In the language of physics: the greatest friction of peace has been overcome.
– In Ukraine, conflicts periodically arise around the appointment anddismissal of supervisory board members. What legal safeguards are needed to make these processes less politicized and more predictable?
– I would highlight three safeguards.
The first is independent and professional selection of candidates. Nomination committees should work transparently and independently, without political influence. The search for candidates should be entrusted to professional recruiters.
The second is clear and comprehensive grounds for dismissing supervisory board members. The updated law has significantly strengthened these guarantees. The supreme management body can no longer selectively terminate the powers of disloyal board members. Now it is important to prevent circumvention of the new rules under the pretext of political or other expediency.
The third is the political will and genuine readiness of the state as the owner to share control of the company with the supervisory board. No law will ensure the independence of the supervisory board if the owner does not play by the rules. By the way, this problem is not unique to state-owned companies. In private businesses, owners also often declare the presence of a supervisory board, but are not always ready to accept the fact that an independent board may make decisions that do not coincide with the wishes of the owner.
– If we talk about corporate governance reform in the energy sector in the coming years, what three legal or institutional changes do you consider to be the most important to increase the trust of investors, donors and the market in state-owned energy companies?
– Cicero is credited with the saying: “We are all slaves of the laws in order to be free.” This very aptly describes the idea of corporate governance. When the main actors – the owner, the supervisory board and management – follow the rules, predictability appears. Namely, it is the foundation of investor and market trust.
Key changes have already been defined in the Ukraine Facility, the IMF cooperation program, and the State Property Policy. Therefore, today the main task is not to invent new solutions, but to consistently implement those already adopted.
I would highlight three priorities.
The first is to ensure professional and non-politicized formation of supervisory boards, as well as a competitive remuneration system for heads and members of supervisory boards. This will allow attracting strong managers, without whom high-quality corporate governance is impossible.
The second is to guarantee real operational autonomy. Supervisory boards should control management, and the state should be an effective owner, without replacing either the board or the executive body. This model is the basis of modern corporate governance standards.
The third is to form supervisory boards in strategic companies, introduce effective internal control, risk management and compliance. As of June 2026, out of all 79 state-owned companies (not only energy ones) where a supervisory board is provided, only 27 have a fully formed composition – approximately a third. Ukraine has already created the necessary regulatory framework. Now its consistent application is becoming crucial.
And finally. Corporate governance reform is not just the expectations of international partners and a formality on the way to the EU. It is a matter of Ukraine’s economic sustainability. If the state respects the rules it sets itself, everyone will win: the state as the owner, the companies with its participation, investors and, ultimately, the citizens of Ukraine.
Corporate governance reform today goes far beyond the issue of forming supervisory boards. It determines the quality of management of state-owned energy companies, their stability, ability to attract investments and work according to clear and predictable rules. That is why the practical conclusions voiced by Volodymyr Igonin are an important part of the professional discussion that Energy Club continues within the framework of the special project. We will continue to acquaint readers with the positions of leading Ukrainian and international experts in order to jointly seek practical solutions for the development of a modern management system in the energy sector.
