The President notifies the CCR regarding corporate governance. Nicușor Dan claims “discretionary expenses” allowed to directors

President Nicusor Dan sent the Constitutional Court of Romania (CCR) a notice of unconstitutionality on the Law regarding the approval of the Government's Emergency Ordinance no. 73/2018 on the corporate governance of public enterprises, citing the fact that the directors of state companies will be able to settle unlimited expenses, following an amendment made by the Chamber of Deputies, informs Agerpres.

The law subject to constitutional review introduces the following paragraph to art. 39 of GEO no. 109/2011: “(5) In the case of public enterprises whose shares are admitted to trading, the expenses for the representation, transport, per diem and accommodation of the administrators and directors, in the case of the unitary system, respectively of the members of the supervisory board and of the members of the directorate, in the case of the dual system, incurred for the purpose of exercising mandates, do not represent benefits or advantages within the meaning of paragraphs (2) and (4)”.

Unlimited spending, made arbitrarily

These paragraphs refer to the capping of certain benefits, individualized as those related to the coverage of representation, transport and per diem expenses, as well as other benefits, undetermined, also capped at the level of two fixed gross monthly allowances during a year, within the limit of two gross monthly allowances during a year.

According to the notification, through the amendment introduced by the legislator, as a separate paragraph, the way is opened for unlimited expenses, which would be carried out arbitrarily within the state-owned companies, more precisely the public enterprises whose shares are admitted to trading, these expenses being circumscribed to the idea of ​​being affected by the purpose of exercising mandates.

Through this amendment, the legislator paves the way for arbitrary settlements under the guise of “exercising the mandate”, the complaint states.

Moreover, it is argued, although formally these sums are no longer qualified as “benefits”, in reality, they will represent material advantages which, by removing the legal ceiling, can be used to evade the remuneration limits established by the mandate contract. This “liberalization” of expenses within listed public enterprises – entities that manage strategic assets of the state – directly makes the way public money is spent vulnerable.

Thus, the scope of expenses that will be incurred by administrators and directors, as well as by members of the supervisory board and members of the directorate of public enterprises whose shares are admitted to trading will include the following categories: those incurred with representation, transport and per diem – for the purpose of exercising mandates – which will be unlimited and benefits – capped at two monthly gross allowances/year.

“The configuration of the expenses allowed for settlement, in this sphere of social relations, allows a quasi-universality of the settlement of the expenses of these categories of employees, from the state budget, which, in our opinion, far exceeds the intention of the initiator – the Government of Romania. By excluding the expenses of 'representation, transport, per diem and accommodation' from the benefits of the categories (which are usually capped by the mandate contract), the premise of discretionary expenses and unlimited. Since these companies use public capital, any erosion of profit through excessive protocol expenses contravenes the state's obligation to protect national economic interests,” the complaint states.

In addition, says the president, through the amendment introduced in the decision-making chamber, the way is opened for the possibility of spending considerable amounts in terms of future benefits for a wide category of employees, respectively: administrators, directors, members of the supervisory board and members of the directorate. Most of the targeted enterprises (listed on the stock exchange) are strategic entities for the national economy.

The president accuses the “camouflage” of some material advantages

The head of state evokes a possible “camouflage” of some material advantages. “A legislative framework that allows the 'camouflage' of some material advantages in the form of professional expenses can lead to a non-transparent corporate governance, undermining the economic efficiency that the state is obliged to guarantee”, he states in the referral to the CCR.

Also, the problem of the predictability of the normative act is raised, because the consequence is the impossibility of estimating the amount of expenses covered by the law, determined by the phrase “made for the purpose of exercising the mandates” that the legislator uses in order to circumscribe them to a certain criterion.

“The quantification of the expenses that can be included in the settlement based on this criterion is practically impossible, there is a risk of violating the provisions of Article 135 paragraph (2) letter b) of the Constitution, which provide that 'the state must ensure the protection of national interests in economic, financial and currency activity' since, obviously, the arbitrary and uncapped management of the resources of public enterprises-companies is likely to directly affect the state's patrimony and, implicitly, the national interest”, the document also states.

The head of state mentions that with this notification he does not bring criticism of unconstitutionality and with regard to GEO no. 73/2018 by which art. was completed. 1 of the Government Emergency Ordinance no. 109/2011 regarding the corporate governance of public enterprises, but only the manner of adoption and the content of the additions brought to it at the Chamber of Deputies, as part of the approval law.