Ukrainian Grid Operator Accused of Enabling Million-Dollar Board Payouts

Andriy Kostrytsia Alleges Conflicts of Interest in State Enterprise Governance

According to Главком: Andriy Kostrytsia, a former member of the Supervisory Board of JSC 'Ukrainian Distribution Networks' (UDS), has raised an alarm over a practice where UDS employees simultaneously hold positions on the supervisory boards of multiple state-owned distribution system operators. He claims this arrangement could earn them combined monthly remuneration of approximately one million hryvnias. Kostrytsia warned that this situation creates a significant risk of conflicts of interest.

In a public letter addressed to Ukraine's Minister of Energy, Denys Shmyhal, Kostrytsia-who is also president of the Energy Club-cited specific examples of UDS staff nominated to several boards at once. The individuals named include:

• UDS advisor Mykhailo Horyn
• Legal counsel Mariia Dovha
• Iryna Kholodnova

Kostrytsia noted that these individuals are candidates for the supervisory boards of the following regional energy companies:

• Khmelnytskoblenergo
• Kharkivoblenergo
• Ternopiloblenergo
• Zaporizhzhiaoblenergo
• Cherkasyoblenergo

“Recently, the expert community harshly criticized the practice of the same officials sitting on the supervisory boards of several state-owned DSOs at once, pointing to a conflict of interest. Today, this model is returning.” – Andriy Kostrytsia

Kostrytsia further questioned how one person could physically and competently handle the complex technical, legal, and financial processes of six different infrastructure companies while also working full-time at UDS. “The answer is obvious,” he emphasized.

He argued that if proper oversight under such conditions is physically impossible, it suggests the supervisory bodies are merely nominal. “High market-level remuneration for supervisory boards was introduced to attract the best independent experts to the state sector, who bear fiduciary responsibility for their decisions. Turning this mechanism into a tool for financially incentivizing loyal full-time employees for a formal presence distorts the very idea of European corporate governance,” stressed Andriy Kostrytsia.

Transparency and Accountability in Management

Kostrytsia's statements underscore the critical need for transparency and accountability in the management of state-owned enterprises, particularly within Ukraine's energy sector. The practice of holding multiple board positions simultaneously raises legitimate concerns about the effectiveness of oversight and potential conflicts of interest, which can ultimately impact the quality of management and decision-making in these vital companies. This issue is especially pertinent as Ukraine seeks to align its corporate governance with EU standards and attract foreign investment for reconstruction. Ensuring that all market participants act in the public interest, rather than for personal financial gain, is essential for the sector's stability and integrity.

In light of Kostrytsia's concerns about potential conflicts of interest within the supervisory boards, the discussion around accountability in state enterprises is becoming increasingly urgent. Experts argue that it is crucial for board members of state companies to face potential legal consequences for their actions. Such measures could ensure that governance remains transparent and effective. For a deeper insight into this pressing issue, read more about the calls for legal responsibility for board members here.