Are Supervisory Boards a remedy?

Another presidential decree was issued this week. The issue arising from this decree is the establishment of a new body to supervise the activities of SOCAR. The new body will be called the Supervisory Board. The board is headed by the Minister of Economy, Mikayil Jabbarov. However, at the same time, a 7-member staff will carry out the activities of this Supervisory Board.

To find a clear answer to the question of which company we are talking about, it is necessary to pay attention to some parameters related to SOCAR; (i) SOCAR is a company that invests billions of dollars in various neighboring countries, (ii) SOCAR is a company that pays1 manat from the average 12-14 manats of state budget revenues, (iii) SOCAR is the only national oil company participating in all oil and gas projects on behalf of Azerbaijan, (iv) SOCAR is a company with $ 65 billion in reserves.

After such dazzling signs, you may wonder why there was no Supervisory Board that controlled the activities of a company, which has a power of "state within the state"?

International Bank, SOFAZ, and SOCAR

In today's civilized world, companies embrace corporate management in order to enhance the company's reputation. They apply its management principles to be able to get more investment and be involved in joint business projects.

When did we lose the International Bank? When did we see a loss of 12.4 billion manats from the International Bank? At the time when the bank's liabilities were already the subject of open discussion. It could not fulfill its international obligations. All the secrets were revealed.

Creditors asked for their money back and so on. However, there was also a Supervisory Board. Who was the head? The Minister of Finance, Samir Sharifov. But why didn't the Supervisory Board sound the SOS signal at any stage before the bank's bankruptcy? Because the Supervisory Board was a formal institution.

Strong controls over the fields where public funds are collected and managed are essential. If the Supervisory Board is established within SOCAR, it is necessary not to rejoice but to worry about the delayed step. If an institution like SOCAR, which is supposed to be profitable, knows no bounds on borrowing, then what will the establishment of supervision change now?

Prior to the decree, SOCAR had its own Company Board. Just as this Board was "managed" by the company's management back then, it will be managed by national economic entities in the same way. Different management boards will be called but the management principles will be the same. If those boards will be managed with the idea of ​​"sit down Fati, stand up Fati", then what new names and surnames will change there?

We can take another example not from SOCAR but from SOFAZ. The composition of the Supervisory Board of SOFAZ has existed since the establishment of the Fund. If the members of the Supervisory Board are composed only of deputy ministers and officials, it means that there is a real concern about the management of oil and gas revenues. Why?

None of the institutions I mentioned have had elements of public representation. None of these organizations have cooperated with the impartial civil society sectors, which have real activities in content. And none of the Supervisory Boards of these bodies have been composed of a representative from the civil society sector. The fundamental aspect of the issue is to change the principles not the names of the boards!

After this, it may be possible to talk about effective management. Effective management requires this formula: the best way to prevent the abuse of a position is to spread and distribute the task as much as possible. Because the fear of being made public puts the government in a vicious circle, and thus everything changes for the worse.

One of the golden rules of sovereign wealth funds is directly related to the collegial nature of the right to dispose of these assets (parliament, etc.), as well as the tightening of control mechanisms associated with it. In this case, asset management is driven by three factors: transparency, efficiency, and accountability.

It is a well-known fact: it is difficult to catch a black cat, and if it is in a dark room, it is doubly difficult...