Sharpen the ax, bury the hatchet

The government last week published a report that paints a grim picture of leading state-controlled companies. Prime Minister Leszek Miller's team detailed mismanagement and criminal activity at 22 concerns. The next day Justice Minister Barbara Piwnik announced criminal investigations against former managers at 14 of those firms. In part, this could be seen as the state using its police powers to intimidate its opponents. The Democratic Left Alliance (SLD) seems to have an unreformed penchant for using judicial and legislative means for the party's good, not the nation's. Its actions against media companies, oil group Polski Koncern Naftowy Orlen's former head, and officials from Eureko, the state-controlled insurer's strategic partner, bode ill for a transparent democracy and a vibrant economy. But last week's report can also fall under the democratic principle of keeping politicians, and their appointees, honest. If accurate, the Solidarity Election Action (AWS) officials, drummed out of office last year, and their appointees, chased from boardrooms since, should be held accountable for any malfeasance. But crucial questions remain. How did this happen in the first place? And what is being done to prevent it happening again?

To answer the first question, a large part of the problem is state-appointed managers accountable to political patrons, not shareholders. State control of companies will never serve the best interest of businesses - which provide jobs, drive the economy and create wealth. And Poland's leaders need to understand that healthy businesses are crucial to Poland's economic development. It is not unpatriotic to make a złoty (or a euro or dollar). So part of the answer to the second question would be for the government to get out of the business of business. The SLD is doing nothing to prevent another round of unaccountable management and bad business by appointing its own cronies. But an equally important component of the answer lies in corporate governance. One of the companies named in the report is publicly traded and others have minority shareholders. If the SLD's report is true, Poland would not stand alone in watching management deceive investors and flout the law. The United States, for example, has watched auditors and big firms complicit in potentially illegal and certainly unethical practices.

But what about Poland's case? Though its named in the government's report, KGHM Polska Miedź's auditors reported nothing wrong with the company. Other firms have been tapped for an initial public offering, which entails a rigorous process of combing the books. What did auditors see elsewhere? Companies in the public domain should be held accountable to a high standard of auditing and transparency. They should be privatized so that they can focus on business, not politics. And a clear legal framework - and efficient court system - should be in place to keep managers honest and accountable. These are the areas where the government can constructively focus its efforts. Political vendettas should be settled at the ballot box - not in the boardroom or at the police station.