The role of boards in Lithuania is changing – they are becoming increasingly professional. However, according to board member and President of the BMI Executive Institute Alumni Club, Rytis Valūnas, there is still room for growth in how non-executive boards act as strategic development bodies, not merely oversight mechanisms. In many private companies, decision-making remains dominated by founders or shareholders, while in state-owned enterprises (SOEs), boards often have to balance financial objectives with political or social expectations.
With experience across energy, law, and both state-owned and private sector governance, Rytis Valūnas spent over a decade as part of the management team at KN Energies, contributing to the company’s strategic transformation. He has also served on the board of Baltpool and currently sits on the boards of Smiltynės perkėla and the BMI Executive Institute. He works in the fields of digital security and corporate reputation, and as an alumnus of the BMI Executive Institute EMBA programme, he actively leads the BMI alumni community.
– What are the main differences between the work of boards in SOEs, municipally owned companies, and the private sector?
The main difference lies in the clarity of shareholder expectations and mandates. In state-owned and more advanced municipal enterprises, a clear system exists – shareholder-representing institutions issue letters of expectations that outline strategic objectives as well as financial and non-financial performance indicators. These letters typically cover several years, helping to establish a stable operational horizon and a predictable scope of accountability.
In the private sector, such practices remain relatively rare (with some exceptions). Many Lithuanian private companies with boards are still controlled by one or two active shareholders, meaning that board decisions often depend heavily on their opinions, which can change frequently. Independent board members usually form a minority and act more as advisors, even though they are legally responsible for all board decisions.
The Scandinavian and Western-style model of independent boards is still developing in Lithuania. However, there are increasingly strong examples of founders stepping back from day-to-day management or recognizing the limits of their expertise when expanding abroad – thus inviting independent board members with the necessary competencies.
– What are the main challenges facing SOE and municipal company boards?
One of the greatest challenges is maintaining balance between generating a satisfactory financial return for shareholders and meeting non-financial or social objectives, as well as broader stakeholder expectations. As one OECD official once half-joked, managing a state-owned enterprise is like navigating between Scylla and Charybdis – balancing the need to generate financial returns with achieving other complex goals.
In public discourse, these expectations are often judged separately – some criticize low returns, while others question high tariffs or expansion plans. Therefore, achieving a balance between operational goals and creating value for both shareholders and society remains one of the biggest challenges for SOE and municipal boards and management teams.
– What is the value of independent board members in such companies?
The introduction of independent board members in municipal and state-owned enterprises has, in my opinion, raised the bar in terms of transparency, risk management, and governance quality. In recent years, Lithuanian SOEs have achieved record returns on capital of 9–10%, with dividends of around €191 million. For a long time, low returns were cited as proof of inefficiency and weak management compared to the private sector. It would be hard to deny that professional, independent board members contributed significantly to this progress.
They risk their reputation and are personally liable for poor decisions, giving them a strong incentive to represent the interests of all shareholders and make decisions that benefit the company rather than individual groups.
– What distinguishes boards that truly help companies progress?
In SOEs, municipal companies, and in general, the most important factors are member preparation, sufficient time commitment, the right competencies, and a strong chairperson who ensures smooth work, high-quality information flow, and clear communication with both management and shareholders.
Candidates must understand the company’s strategy, shareholder expectations, and sector specifics, and be motivated to join the board not for prestige or position, but for the genuine opportunity to create value and justify the trust placed in them.
In governance overall, the “management triangle” – shareholders, the board, and the executive team – is key, meaning smooth communication among these parties is essential. The management team must implement board decisions, and those decisions must reflect shareholder expectations and be clearly understood by all sides – ideally also by the public.
Corporate progress depends on constant adaptation, identifying new opportunities, and risk management. In my view, boards that truly help companies progress are those that take responsibility for these elements at the strategic level and remain result-oriented (“businessmen”) rather than process-oriented (“busymen”).
– Can you share an example of successful governance in an SOE or municipal company?
A close example for me is KN Energies (formerly Klaipėdos Nafta), where I worked for many years. KN’s story is a genuine example of governance transformation – from a local company whose executives were once prosecuted for misconduct to an international, professionally managed enterprise.
Today, KN operates LNG terminals not only in Lithuania but also in Brazil and Germany, provides consulting services to other countries, and generates significant returns for both shareholders and the state. Independent board members – including foreign professionals who joined in 2017 – played a major role in this transformation, bringing their expertise, reputation, and valuable international networks.
Looking at the SOE sector as a whole, it’s clear that over the past decade, every SOE board has contributed to positive change and stronger performance. The boards of major SOEs have even become attractive to experienced international professionals.
– What topics is the BMI Board Network community currently focusing on?
Last year, together with BMI colleagues, we realized that our community of more than 1,300 leaders has accumulated significant governance experience worth sharing with both alumni and the broader business community. The exchange of knowledge, lessons learned, and discussions within the BMI Board Network, launched this year, help members become better board professionals and executives – supporting the growth of Lithuanian businesses and the economy as a whole.
We focus on both fundamental and current topics. This year’s priorities include the implementation of gender quotas in large-company boards, the ongoing succession challenges in family businesses, differences between governance models in SOEs and private enterprises, and the “recipes” for effective board performance.
One of the biggest challenges for boards overall is managing an increasingly complex operating environment – from geopolitical and cybersecurity risks to growing regulatory pressures and the impact of artificial intelligence on business models and competition. If these topics are not yet on your board’s agenda, it’s time to be concerned!
– From your perspective, is there still a gap between how boards operate in Lithuania and abroad?
One of the main differences is that in Lithuania, the formal scope and workload of boards is much greater than in Western countries. Legally, especially in SOEs, boards must approve numerous transactions and service rates, often becoming involved in operational matters – something that surprises foreign board members used to less frequent, more strategic meetings.
In the private sector, when founders step back, there are still cases of micromanagement. In Scandinavia and Western Europe, the board’s role is clearer – supervision, strategy, CEO appointment, and evaluation. Lithuania still has room for improvement in this area, especially in delegating responsibilities and strengthening trust.
– What can we learn from countries with longer governance traditions?
Foreign board members bring essential competencies, particularly valuable when companies are expanding or transforming, while Lithuanian board members better understand the local context and shareholder culture. Personally, I relate to the Scandinavian philosophy – decisions should be discussed until consensus is reached – while in Southern Europe, it’s more common to vote “for” or “against.”
There is no single perfect governance model, which is why the BMI Board Network community studies Baltic, Scandinavian, and Western governance practices to apply what works best in our local environment.