Strategies of misusing state owned enterprises in contemporary Poland

Government and Corruption
Mar 20, 2019
4 min read

This work discusses the many ways in which State Owned Enterprises (SOE) are being misused in contemporary Poland. The misuse is a form of corruption but is analyzed here in a broad sense showing its diversity. There are two main strategies of SOE misuse; by misusing their financing as well as misusing the positions within them. Using SOEs in multiple way to support the governing (and therefore controlling them) party as well as to reward its supporters are central themes.

First, most evidence on this topic is based upon individual cases, this makes it difficult to estimate how widespread the phenomenon is. There have been attempts to quantify it however, “Plus Biznesu” a local equivalent of the financial times in 2017 published a list of 1000 names of individuals in publicly owned firms, government funded organizations and government agencies who either where governing party members or connected to the governing party by personal or family ties and at the same time did appear to possess suitable qualifications. The same newspaper in 2012 composed two identical lists of that time two governing parties; both lists consisted of over 400 names. There exist also evidence surrounding CEOs of SOE as well as their supervisory boards. Since the new government came to power virtually all CEOs of the largest SOE have changed. This phenomenon did also take place during previous government changes but to lesser extent. Therefore, the phenomenon is widespread and has increased in recent years.

A major misuse of SOEs is using them for funding. SOEs advertise in pro-government media, thru using advertising they may be legally funded. This is particularly prevalent in newspapers and especially weekly newspapers. Before the most recent government change advertisement spending of SOEs was distributed representatively to the market shares of different outlets. Since then there has been significant changes with advertisement dropping in large outlets and increasing in smaller outlets, although only those classified as pro-government. For example, for the newspaper “wSieci” SOEs advertising increased by 1400% and currently composes the main revenue source of the newspaper. 4 of the main pro-government outlets received 50% of the advertisement where’s their combined market share is 20%. Similar patterns are observed in TV and radio.

SOEs are also used to help distribute pro-government media. SOE owned petrol stations have guidelines requiring them to present pro-government media in favorable positions at newspaper stands, these go as far as suggesting hiding outlets most connected to the opposition “behind” pro-government papers. The same is true for the state-owned airline which has only pro-government media in its news selection. Yet another way SOEs are used for funding are sponsorships. SOEs especially the main ones are frequent sponsors of conferences and events connected to the governing party. Also, State-owned banks have been involved in two major scandals about attempts to give loans on favorable conditions for projects of the government party. One of this included the attempt at buying an independent radio station thru a public bank loan by one of the pro-government weeklies. This did not materialize therefore is not a form of SOE misuse, but an area of possible misuse of which they may be more attempts in the future.

As mentioned before the majority of CEO and many managerial positions are held by individuals connected to the governing party and unqualified for the job. This is taking place due to a number of reasons, firstly many positions are given to family members and personal friends. This is used for the financial gain of one’s relatives due to the high salaries, there has been also been cases for parts of the money going back to the party member who secured the position for someone. A more interesting form of misuse is using these positions to buy loyalty. After the last election to regional assemblies many assemblies were left with equal number of government and opposition members; in a number of these opposition members defected to the governing party giving it majority. These individuals were subsequently found to have received high paying positions in SOE supervisory boards. SOEs have been used to not only buy loyalty but also to reward it. There are cases of loyal journalists and government officials receiving managerial positions upon leaving their previous posts. This also includes someone who years ago offered the current governing party leader a loan, both she and her driver have received high paying positions.

Loyalty is a common theme in the selection process for positions in SOEs, not only to buy it and reward it but loyalty appears to be a key element which allows to misuse SOEs in the first place. An interesting case is of “Kluby Gazety Polskiej”. These are clubs of a far-right newspaper which have been supporting the current ruling party for many years before it was governing. Many of the individuals form these clubs have received important SOE positions, even as a general rule they are completely unqualified. Neither do these clubs posses any political or lobbying power of their own to force the governing party to give them any positions, they received these solely based upon the governing party’s initiative.

SOEs are misused not only at party but also and individual level. CEOs of the major SOEs have not changed only once after the last election, many have received new CEOs multiple times a year, up to having a new CEO every 20 days. This has a number of causes, but one is the conflict over them within the governing party. Different strongmen place their loyalists in SOEs as well using the positions to buy loyalty. The process is unfortunately less known due to its secrecy and the main source being leaks therefore its nature and scale is uncertain and needs further research.

To conclude there are many ways in which SOEs may be used to promote party or private benefit rather then fulfill their proper function. The misuse in contemporary Poland is extensive and has to watched closely as new strategies are constantly tested.

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Strategies of misusing state owned enterprises in contemporary Poland

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