Representatives of the National Agency on Corruption Prevention (NACP) took part in a public discussion of the results of the implementation of corporate governance reform of defense industry enterprises.
The roundtable, organized by Ukrainian Defense Industry JSC (UDI), focused on the implementation of measures envisaged by the Law of Ukraine "On the peculiarities of reforming the enterprises of the military and industrial complex of the state form of ownership" bringing the corporate governance system of business entities in line with the standards of the Organization for Economic Co-operation and Development (OECD), as well as building a culture of integrity and zero tolerance to corruption.
Examples of fruitful cooperation between the National Agency and UDI JSC include providing proposals to the draft Anti-Corruption Program developed by the Company, as well as monitoring the implementation status and updating recommendations to overcome the most common 15 corruption risks previously identified and analyzed by the NACP in 2021 (the NACP study "Top 15 Corruption Risks in the Management of Ukroboronprom Enterprises and Ways to Overcome Them" was conducted in 2021, when the Company was still a state concern). The study covers a wide range of issues related to the introduction of a corporate governance model at Ukroboronprom enterprises, inventory of real estate and land resources of state-owned defense enterprises, as well as the use of online auctions for property lease, etc.
According to Director General of JSC UDI Herman Smetanin, in the process of implementing the recommendations provided by the NACP, the emphasis was placed on three priorities.
"We are conducting a competitive selection process for the positions of directors of enterprises that were dismissed due to mismanagement. The companies should be run by honest managers with an impeccable reputation, without corruption and a dark past. The second area of work is the efficient use of funds. Thanks to procurement through the ProZorro system, we have saved UAH 116 million since JSC UDI became a joint-stock company. And the third is the efficient use of property by defense companies. The reform also provides for the transformation of state-owned enterprises into JSCs or LLCs. We are very grateful to the NACP not only for their thorough monitoring of how we are implementing their recommendations, but also for their advice on how to implement these recommendations correctly and how to avoid corruption risks," said Mr. Smetanin.
According to him, more than 30 enterprises of JSC UDI have been corporatized through the transformation into business companies and 19 candidates for the positions of heads of enterprises have been transparently selected.
In addition, over the past 9 months, JSC UDI has approved the Strategy for Preventing, Detecting and Combating Corruption for 2023-2024 and its implementation plan; introduced direct channels of communication between employees and the Head of Compliance and Risk Management, and the Company has been connected to the Whistleblower reporting portal. In addition, a draft Anti-Corruption Program has been developed, which is currently being finalized based on the recommendations of the NACP experts.
According to Maryna Barynina, Head of the NACP Security and Defense Integrity Policy Development Department, at the time of the Agency's monitoring at the end of 2023, 65% of the recommendations had been fully implemented (16%), partially implemented (13%) or were in the process of implementation (36%). First of all, JSC UDI was proposed to accelerate the implementation of recommendations related to the corporatization of the Company, the creation of an internal control system, including compliance and risk management, and the introduction of internal audit.
Presenting the updated recommendations for overcoming the top 15 corruption risks in the Company's activities, Maryna Barynina emphasized their consistency with the measures of the State Anti-Corruption Program for 2023-2025, taking into account the changes in legislation and peculiarities caused by the legal regime of martial law in the new version of the recommendations, as well as setting clear deadlines and indicators of implementation, which will allow monitoring the implementation of recommendations according to certain criteria and periods.
According to NACP Head Viktor Pavlushchyk, who joined the online public discussion, the issues of efficiency and integrity of defense companies are extremely relevant today.
"I would like to note the Company's progress in implementing the OECD recommendations on corporate governance and implementing the measures envisaged by the Law of Ukraine "On the peculiarities of reforming the enterprises of the military- industrial complex of the state form of ownership". The NACP welcomes the Company's course towards further corporatization. We look forward to the election of the third independent member to the Company's Supervisory Board. We actively support UDI efforts to prevent corruption, build a culture of integrity and zero tolerance for corruption. We are pleased to see that the NACP proposals have been taken into account in the Strategy for Preventing, Detecting and Combating Corruption for 2023-2024," said Viktor Pavlushchyk and assured that the NACP will continue to provide methodological assistance and recommendations, as well as systematically monitor the status of their implementation.
David Lomdzharia, Chairman of the Supervisory Board of the Company, representatives of the Ministry of Strategic Industries, Ministry of Defense, NATO Representation in Ukraine, the UK Special Adviser on Defense Program, as well as key anti-corruption organizations StateWatch and NAKO also took part in the public discussion of the results of the corporate governance reform of the defense industry
