Wanted: three Estonian kings

Photo: Peeter Langovits

Who will be leading the three top important state enterprises blessing the treasury with 90 percent of all public company dividends? We’ll soon find out.

This fall will show if Eesti Energia, Port of Tallinn and Elering will still be led by Sandor Liive, Ain Kaljurand and Taavi Veskimägi – respectively.

In the Estonian sense, these men draw giant salaries, but they do stand responsible for companies vital for the daily Estonian life and economy. These three are trusted with nearly a third of state-owned corporate assets.

Eesti Energia is a leading energy producer in the Baltics which, hopefully, will also make it to the world scene due to shale oil technology development. With Elering, the state has no hopes of dividends, as the company needs to secure Estonia’s electricity supply in any weather and economic storm. Port of Tallinn, the symbol of transit business a dozen years ago, has now become Estonian passenger shipping window into Scandinavia.

While nine candidates have registered to lead Elering, applications for CEO of Eesti Energia are expected till August 11^th; for Port of Tallinn the deadline is August 22^nd.

All three current bosses look quite likely to keep their posts. Their personal reputation is good, the companies have been led well, and the economic figures look excellent. The controversies, occasionally flaring into public scandals, seem to be part and parcel of business battles which, with Eesti Energia especially, has historically been amplified by pathological inability to solve media crises.

But these very strengths that keep the three kings on their thrones may be to their downfall.

Namely, these men are leaders whose expertise far surpasses the competency of the councils tasked with their supervision. According to National Audit Office, even the ministers – in the role of owner’s general meeting – are unable to have a bold say, as expected of them, regarding the direction of these state enterprises. «As the audit revealed, however, the owner has often failed to set goals to the operations of the state enterprises – nearly half of enterprises audited lacked a strategy approved at the council,» noted the Audit Office.

Of the three enterprises in question, Elering and Port of Tallinn had strategies at the time of the audit, but only Elering’s council updated the strategy yearly and checked if the goals were being fulfilled.  

The lack of strategy, however, has not kept the state from granting the enterprises hundreds of millions of euros for investment. «It remains unclear on the basis of which goals and information the companies’ boards and councils have taken the investment decisions, the owner thus placing money into these enterprises,» stated the Audit Office. «A lack of strategy reveals that the enterprise and the state have not agreed what the state expects of the enterprise i.e. essentially the state has no say in directing the development of the enterprise.»

This means that a strong executive has been able to guide the company as he saw best; occasionally, the minister and the council may buck, but they will soon settle into a submissive trot.

The government has made it its habit to vociferously grumble against what the Audit Office points out. Firstly, that’s because independent criticism pricks at the pride in the portfolio-guys. Being prudent people, they have usually afterwards quietly heeded to the advice by Audit Office. 

For a minister, it would provide a measure of ease and relief if, instead of a forceful and competent chief, he might set in place some rookie eager to prove himself.

In that light, the chances of Taavi Veskimägi to keep his post look the likeliest as, formally, Elering corresponds most to what Audit Office considers best strategic management practice. Will his former IRL membership (now pushed out of coalition) and break-up with non-married companion Kaja Kallas (Reform Party) play a role, time will tell.

Mr Liive also looks to sit firm in his saddle. As the media reported that the term of the man viewed as a symbol of Estonian electricity business is nearing its end, with a public competition pending for his post, finance minister Jürgen Ligi was quick to explain to the public Mr Liive’s many virtues.

Occasionally, large investments and tough competition of operators have shaken the chair under Mr Kaljurand, CEO of Port of Tallinn. His severest headache must have come under Juhan Parts  (IRL) as economy minister, when controversies over the port’s economic decisions often boiled out of the pot, straight on the hot stove. But with the soc dems now in possession of the ministerial portfolio, Mr Kaljurand’s standing looks stronger with Reform Party traditionally by his side.  

Fourth of state enterprises profitable

Of the 42 enterprises with state ownership, 32 are 100 percent state owned. Only 11, however, are able to make such profit as to allow dividends to be drawn for state coffers. Last year, the so-called donor companies paid over €208m – in dividends and taxes therefrom. 90 percent of that came from Eesti Energia and Port of Tallinn.

For Audit office, it remains unclear why the state owns most of these companies – the goals of making a profit, and the goal of public interests and national economic security are mightily mixed and messed up.

In several dividend-making enterprises, public CEO competition will happen this year or the beginning of next: Eesti Energia (2014 dividends – €114m), Port of Tallinn (€42m), Estonian Air Navigation Services ($4m), Estonian Lottery (€6m), Estonian Railways (€2m), EVR Cargo (€1m), Eesti Post (€0.6m), Eesti Teed [roads – edit] (€0.4m), and Technical Centre of Estonian Roads (€0.03m). Estonian Pilot (€2m) and Estonian Environmental Research Centre (€0.03m) will be looking for a new manager in 2018.