Wednesday the entire board of directors of EPM, Empresas Públicas de Medellín resigned, leaving Medellín’s mayor Daniel Quintero alone. The board took this action after a collapse in corporate governance when the politically inexperienced mayor took major decisions that would normally go through a ratification process through the board of directors.
Two weeks ago, the mayor announced, without any board approval, that he will transform the utility company serving metropolitan Medellín with basic services such as electricity, water, natural gas and sanitation into a conglomerate involved in everything from tourism to tunnel boring —though such a fundamental transformation had never been discussed with the utility’s board of directors, or even the city council.
Despite repeated requests by Finance Colombia, Mayor Daniel Quintero, through his press secretary has refused to respond.
EPM, though owned by the city of Medellín, is run as a corporate utility with operations and assets from México to Chile. The company is a rated issuer of corporate bonds, and has up until now been run at arm’s length from the city’s political structure. The Mayor has a seat on the company’s board of directors and may appoint the CEO and board members as their terms expire, but beyond this, is generally not involved in the management of the company.
The final shock was EPM’s announcement on August 10 that it would launch a $2.7 billion USD lawsuit against a consortium of firms involved in the utility’s troubled Hidroituango hydroelectric project. Regardless of whether the legal action has merit, the legal action was instituted with no involvement or knowledge of the board of directors, breaking all established norms of corporate governance.
Even Quintero’s own appointees, Luís Fernando Alvarez Jaramillo and Jesús Aristizábal Guevara resigned in protest of the mayor’s actions. The mayor’s unilateral actions may have grave consequences for the utility, as EPM counts heavily on its credit rating and high esteem in the eyes of international investors.
The board’s resignation left the utility’s CEO, Álvaro Guillermo Rendón trying to explain to the media and public why the entire board of directors resigning or the mayor’s actions are nothing to worry about.
“Inside (of EPM) we have taken it as a regrettable situation, but this does not take away from the governance of the institutions,” he told local paper El Colombiano after the action.