State announces intention to decrease number and wages of board members in the country's state-owned corporations

The Romanian Government's General Secretariat has unveiled a draft law aimed at reforming state-owned enterprises and autonomous institutions. This move is part of Romania's commitments under the PNRR and efforts to reduce budget spending.

The draft law substantially modifies the corporate governance framework of state-owned enterprises, introducing new performance indicators, remuneration limits, and efficiency measures.

One of the key changes is the introduction of new performance indicators for state-owned companies, which will be mandated in the contracts of their boards of directors and directors. The draft law also caps the number of board members in entities, depending on their size and structure—either at 3 or 5.

Boards of directors established under current legislation will end their mandates according to their original composition. Members with excess remuneration have 30 days to adjust their contracts to comply with the draft law's remuneration limits. Bonuses for board members are capped at two average gross wages, and the project introduces new limits for the variable component of compensation.

The draft law does not specify a timeframe for the termination of mandates for members of the directorate, nor does it provide details on the process for revoking members of the boards of directors or public enterprises. It also does not address the issue of damages in case of revocation.

In addition, the draft law does not address the consequences for non-compliance with the 30-day deadline for adjusting remuneration contracts. Parties not agreeing on amendments may face revocation by public guardianship authorities or shareholder meetings without compensation.

The personnel in market regulators will be reduced by 10% for expert roles and 30% for support personnel. New criteria for companies selecting administrators and directors of state-owned companies are provided in the draft law.

The draft law does not address the consequences for non-compliance with the 30-day deadline for adjusting remuneration contracts. The mandate contracts of state-owned enterprises will include minimum levels of key performance indicators.

The author responsible for the reform of the State Enterprise Act and the so-called autonomous institutions, such as the regulatory authorities for the financial, energy, and telecommunications markets, is typically the relevant government minister or legislative committee, but no specific individual name is universally cited.

The draft law aims to introduce efficiency measures in large autonomous administrative authorities. It does not, however, provide details on the process for revoking members of the boards of directors or public enterprises.

As the draft law progresses through the legislative process, further details and amendments are expected to emerge. This reform is expected to bring significant changes to the management and operation of state-owned enterprises in Romania.