Corporate governance reform

In March 2015, the World Bank and the Energy Community Secretariat agreed on a Ukrainian Gas Sector Reform Implementation Plan, which was approved by the Ukrainian Government. Among other things, the plan provided for reforming the corporate governance of National Joint Stock Company “Naftogaz of Ukraine” following OECD Principles on Corporate Governance.

In 2016, the Gas Sector Reform Implementation Plan, including the Company’s corporate governance reform, became a part of Ukraine’s commitments under loan agreements with the European Bank for Reconstruction and Development (EBRD). External stakeholders recognised the implementation of this plan as a necessary step towards Ukraine’s integration into the European Union, and the success of the corporate governance reform as an important guarantee of the security of gas supply in Ukraine and Europe.

The reform aimed to implement rules and procedures that are in line with global best practices, primarily the OECD Guidelines on Corporate Governance of State-Owned Enterprises (OECD Guidelines) and the OECD Principles of Corporate Governance. 

The following have been identified as the key components of good corporate governance:

  • existence of full-fledged and effective governing bodies,
  • clear distribution of authorities;
  • functioning of internal control system;
  • barring political influence;
  • creation of market conditions equal to those of private companies.

Naftogaz became the first state-owned company to introduce corporate governance best practices compliant with OECD Guidelines. The Corporate Governance Action Plan (CGAP) developed by experts and legal advisers became the roadmap for reform. 

2016 saw the first Supervisory Board formed with a majority of independent directors, Supervisory Board committees formed, corporate secretary appointed, and the implementation of a proper corporate governance system. During 2016-2018, the Company developed and implemented an internal control system based on three lines of defence. The creation of a fully functioning internal control system was confirmed in 2018 by the findings of an independent consultant.

During 2019-2020, Naftogaz continued with the transformation and construction of a highly efficient operating model to enable matrix-based management structure and the appropriate distribution of decision-making powers and responsibilities. Along with legal entities, business divisions and corporate functions are formed in order to enable maximum effectiveness per business area of Naftogaz Group, and to achieve corporate goals.

The Company’s corporate governance reform has attracted the attention of international organizations, including renowned experts in the functioning of state-owned enterprises in general and their corporate governance in particular. In recent years, experts from the Organization for Economic Co-operation and Development (OECD), with the active involvement of the Company and other stakeholders, have implemented two important projects on anti-corruption and corporate governance reform, the results of which are reflected in the following reports:

  • Anti-corruption reforms in Ukraine: prevention and prosecution of corruption in state-owned enterprises; and
  • Reforming state-owned enterprises in the hydrocarbon sector in Ukraine.

A key event in building a proper corporate governance system of Naftogaz Group in 2020 was the approval by the Government of the ownership policy of National Joint Stock Company “Naftogaz of Ukraine”, which is one of the key documents provided for by OECD Guidelines to define the purpose of public ownership, strategic goals, and business areas as defined by the shareholder.

This policy reinforces the state’s commitment to implement corporate governance at the Company in accordance with OECD Guidelines, as well as providing a solid foundation for the formation and approval of Naftogaz Group’s corporate strategy and key performance indicators for both Supervisory Board members and Naftogaz Group executives.

In October 2020, the Government also approved a new version of the Charter of National Joint Stock Company “Naftogaz of Ukraine”, which brings it closer to the requirements of OECD Guidelines. However, it should be noted that Naftogaz Group corporate governance reform has not been completed and the CGAP has not been implemented in full, although a significant amount of work has been done. Even more changes are to be made, the implementation of which requires updates to the legal framework in terms of proper distribution of powers between the governing bodies of state-owned companies.

In September 2021, the Government of Ukraine decided on the early termination of the powers of the members of the Supervisory Board. As per the Company’s Charter, after the voluntary resignation of its members, the supervisory board lost its jurisdiction, i.e., its decision-making powers.

The Cabinet of Ministers of Ukraine performed the functions of the Supervisory Board of Company until the election of its new composition.

The Cabinet of Ministers of Ukraine has appointed six members of the Supervisory Board of National Joint Stock Company “Naftogaz of Ukraine” on 24 January 2023. The Supervisory Board was appointed based on the results of a transparent and independent competition in line with OECD Principles of Corporate Governance and OECD Guidelines on Corporate Governance of State-Owned Enterprises. 

Current information about the Group can be found here.


During 2020, on average, top management consisted of five members of the Executive Board and 12 directors (2019: five Executive Board members and 11 directors). Compensation for top management included distribution expenses, general and administrative expenses, which also included wage and additional current bonuses and amounted to UAH 672 mn (2019: UAH 343 mn).

In 2020, the Group also conducted payments for ensuring the functioning of the Supervisory Board amounting to UAH 20 mn (2019: UAH 35 mn) that includes payment for services of the Supervisory Board amounting to UAH 18 mn (2019: UAH 29 mn), and also UAH 2 mn (2019: UAH 6 mn) as reimbursement expenses related to fulfilment of obligations as Supervisory Board members and liability insurance procured and paid by the Company after appointment.