Mr. J.Unenbat, director of the Corporate Governance Development Center, wants certain basic principles to be followed when members of a board are chosen. “Selection should be on the basis of skills, experience and the likely contribution of the person to furthering the interests of the company,” He has said, adding that the really important thing, however, is that “such boards have some actual power and are left free to perform their main tasks, which are to appoint the executive management, and to monitor and guide its work. The state should not appoint people without the approval of the board.”
He admits there is a dichotomy when members are appointed to the board of a state-owned company. “It is true that members chosen by the State Property Committee (SPC) may find it difficult to be independent, thus affecting good corporate governance, but the state can control its property only through a board, and as the largest shareholder it has the right to appoint a board of its choice”, he says. The best solution is to give total independence to a board once it takes charge, he says, adding, “As shareholder, the state should not have any other goal than making profit.”
Mr. Unenbat sees no merit in occasional suggestions that the SPC should be allowed to manage things directly. This, he asserts, “contradicts the principles of good corporate governance”. The board represents shareholders, and should bear the final responsibility for the company’s policies, strategy and performance. He says there would be no need for a board “if the shareholder is directly and actively involved in the board’s work”. The crux of the matter, he says, is that the main aim of the state representatives on the board is to increase the final worth of the company and the main issue for them is “whether to serve the interests of the company, or those of the ministry or the organization which appointed them”.
Source: The Mongolian Mining Journal
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