Increasing the efficiency and effectiveness of state-owned enterprises, defining development goals and performance criteria, and reconciling social interest with profit maximization are questions that sought answers at the first panel of the Lider conference ‘State-Owned, Yet Efficient’.
The key management problem of state-owned enterprises is how to reconcile social interest and profit maximization, said Davor Labaš, an assistant professor at the Faculty of Economics in Zagreb, in the panel’s introduction.
What must we do to make state-owned enterprises more efficient?
– The state needs to have an active ownership role in corporate governance, it should conduct performance benchmarking, encourage the development and implementation of technological innovations and measures of innovativeness. Additionally, it should align corporate responsibility activities with the SDG goals, focus on monitoring the environment and risks, as well as business transparency and integrated reporting, explained Labaš.
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– The mere existence of a set of measures, or indicators in state-owned enterprises is not enough. It is essential to clearly define the goals of state-owned enterprises and have a quality management system that enables the achievement of these goals through success, providing information for effective decision-making at both strategic and operational levels. Through modernization and restructuring of state-owned enterprises, as well as strategic management and reforms at the state level, state-owned companies can be a driver of economic development and sustainability, stated Labaš.
– State-owned enterprises have the opportunity through government public policies to create social values and financial profitability. The right question is not whether to have or not have state-owned enterprises in national economies, but how and in what way to manage state-owned enterprises and how to integrate them into social interest, concluded Labaš.
Profit as a Byproduct
HEP board member Marko Ćosić stated that the main goal of his company is to increase the company’s value and that they need to answer the government, as their owner, every year whether their decisions have contributed to that goal or not. In response to a comment from the editor-in-chief of Lider, Miodrag Šajatović, the panel moderator, that the race for profit maximization through increased electricity prices harms exporters, he said that HEP must be competitive and efficient due to market competition and that exporters cannot build competitiveness on lower electricity prices.
The main goal of Hrvatske šume, said CEO Krunoslav Jakupčić, is to increase the value of forests, and profit comes as a byproduct, with the performance criteria of their company being clearly measurable and defined by biological care and forest renewal.
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Narodne novine, on the other hand, said CEO Zlatko Hodak, aims to increase the company’s value and continuous sustainable development, admitting that their owner has not set goals and key performance indicators and that setting goals and indicators would be a good solution.
An open question remains from moderator Darko Tipurić, a professor at the Faculty of Economics in Zagreb, whether the state has mechanisms to measure the performance and key indicators of companies in its ownership.
Zvonimir Samodol, CEO of Hrvatsko kreditno osiguranje, asserted that profit maximization is not their exclusive goal, but they have ambitiously set a desired growth rate, while Josip Škorić, CEO of Hrvatske ceste, concluded that in his state-owned company they primarily think about building an efficient organization and that their fundamental performance indicator is raising the level of safety and ensuring smooth traffic flow on the roads.
Authors: Aleksandar Tešić and Ivan Ivanović
