Objective criteria can help new PM choose right public company bosses

A day after the elections, the new prime minister will be called upon to make some important decisions regarding the placement of senior managers at the head of the country’s leading public enterprises in a bid to improve their results while also providing a boost for the broader economy. The selection and appointment of management for state-run companies and regulatory bodies is a procedure that needs to be implemented objectively with the assistance of existing criteria that can also be used to determine the management’s success. Such a decision potentially can have a direct outcome on the operation and direction of the country’s markets, but it can also be backed up by a continuous assessment system. Gone are the days when failed politicians and the party faithful could seek refuge in positions of power belonging to the broader public sector. The country’s newly elected prime minister will need to design and implement a system in order to appoint heads of public enterprises with indisputably objective criteria. This may be based on previous professional experience and market reputations. A system of independent criteria for the selection of those called upon to head public companies must be applied across the board, but one thing cannot be denied: There will need to be exceptions made for companies that play an important role in the implementation of government policy, such as the National Bank of Greece and Agricultural Bank. Appointments to these banks require the prime minister’s own personal stamp of approval. Other areas which will need to be exempt include the appointments made to Emporiki (formerly Commercial) Bank, telecom company OTE and the Capital Market Commission. Sectors such as tourism and exports will also demand different treatment as they, too, need to coordinate with government decisions. The whole issue, however, is very simple. The boards of public enterprises listed on the Athens bourse should not only be judged at shareholders’ meetings but also by their majority shareholder, the Greek State. This can be done based on a criteria system. Criteria list One item which cannot be left out of this list of measures is an assessment of the stock’s performance, which is none other than the dividend. Alongside the dividend assessment there can also be other general criteria relating to the broader Greek economy and its productive powers. A dimension which is of importance here, and which needs to be taken into consideration, is the public enterprise’s competitiveness. This is a measure which has a direct impact on the company’s ability to expand into other markets and its potential to withstand new players entering its own market. A second necessary item on this criteria list has to be the company’s policy toward expanding outward into other markets, specifically its systematic efforts to have a discreet and profitable presence in foreign markets as it broadens into other competitive environments. In other words, companies which were previously public enterprises will need to expand and intensify efforts in order to have a presence abroad so that they are also in a position to defend their local market share. Previous experiences of public companies expanding into the Balkan and southeastern European markets have shown poor results, apart from a few cases. This has not only had a negative impact on long-term Greek interests, but has also left behind it a list of outstanding issues that need immediate attention. A typical example is telecoms company OTE. Its investments in the Balkan region and Romania have left open wounds, while the returns on its foreign operations or interests have been a regular source of concern for investors. At times these developments have even had a negative impact on the broader Greek stock market. This comes into stark contrast with the National Bank of Greece, the country’s largest bank, which has produced profitable results against the grain: results which came about from a combination of the right people and the right management criteria.