Cabinet dismisses Ukrainian Railways CEO

The Cabinet of Ministers decided on March 17 to
dismiss Volodymyr Zhmak from the position of CEO  of Ukrainian Railways
(RAILUA), the company’s website reported the same day. Ivan Yuryk, the member
of the management board responsible for finances, was
appointed acting CEO. Zhmak was dismissed on the proposal of the company’s
supervisory board, which acted “in the best interest of the company,” the
board’s press release stated. The supervisory board also promised to launch the
competitive selection of the new CEO.

Commenting on the dismissal, Zhmak wrote in social
media that such a decision lacks grounds and violates laws and procedures. He
said that he received from the head of the supervisory board an offer to resign
voluntarily on March 16, but declined it. Zhmak highlighted that he was
dismissed just the next day, pointing at the unusually fast procedure of his
dismissal. “Someone was in a hurry with this,” he commented.

This is the fourth replacement of the company’s top
manager since the beginning of the last year and the second time Yuryk is
heading the company. Recall, in January 2020, the Cabinet dismissed
Yevhen Kravtsov, who occupied the position of CEO
for almost 2.5 years. Željko Marček, who was appointed
as acting CEO in February 2020, was replaced by another acting CEO, Yuryk, in April. In August,
the company finally got a full-fledged CEO, Zhmak, who served
at this position for less than seven months.

Alexander Paraschiy: The
company’s supervisory board provided little explanation about “the company’s
best interest” behind its decision. What we can conclude from this situation is
that Zhmak had not been able to find common ground with the government. A good
relationship with the government is essential for the company’s reforms that
need changes in the regulations. From this standpoint, Zhmak’s dismissal looks
promising for the company. On the other hand, the replacement of the top
manager does not guarantee the reforms in the company will speed up.

Recall, a day before the dismissal Zhmak announced an
initiative to pursue the liberalization of freight rates, which would result in their increase. As a result
of this, the company’s key business customers (read, Rinat Akhmetov) would have
suffered. As we assumed yesterday, the pressure on Zhmak might have been rooted
in Ukrainian tycoons (if so, his dismissal is bad for the company). However,
alternative assumptions cannot be ruled out, e.g. that Zhmak, knowing about the
high probability of his dismissal, voiced an idea to raise freight rates (to
the benefit of the company) to get a chance to look as the victim of an
oligarchic conspiracy.

Whatever is the reason for Zhmak’s premature
dismissal, it adds little to the company’s investment case.