Shipping needs radical overhaul of corporate governance

(Posted on 22/05/24)

Captain Pappu Sastry, CEO of Adhira Shipping and Logistics (ASL) is calling for a radical restructuring of corporate governance in shipping to relieve pressure on crew and ship managers and provide professional oversight of shipping companies and owners.

Shipping is failing to ensure the necessary oversight of operations, finance and liability due to fragmented corporate governance structures that leave gaps between owners, investors, managers and crew, according to Capt. Pappu Sastry, CEO of ASL.

The stress points according to Capt. Sastry are that managers are often under commercial pressure to carefully manage costs, in order to retain contracts from owners by maximising profitability, while managing the safe operations of the ships in their fleet.

While most owners are responsible and work with managers to ensure their vessels are operated in a safe and secure manner, many Special Purposes Vehicle set up to acquire ships do not have the same commitment give little or no thought to the maintenance of the ships they charter, with a very narrow commercial approach and distancing themselves from the responsibility of effectively running the vessel and directing its employment and trading patterns.

“The managers are particularly exposed following an incident, as many operators give little or no thought to the maintenance of the ships they charter and have a very narrow commercial approach and distance themselves from the responsibility of effectively running the vessel and directing its employment and trading patterns,” said Capt. Sastry.

In such a scenario and especially when there is an incident that affects the environment or safety of life at sea, the onus of the standards of management is always limited to the managers.

To resolve this disconnect Capt. Sastry suggests that every shipping company should be made responsible for thedecisions they take and the reasons for their instructions. The structure of aboard of directors and board of advisors is the starting position.

The ship owning companies (which are a collection of SPVs) should have a working body responsible for the operations of the company and a governing body with the directors being responsible for the strategic decisions that dictate the standard of management.

The non-asset-based ship operating company could use the corporate structure as an entry barrier for anyone with a computer to start and work a ship operating company. This will standardise the shipping company’s responsibilities and ensure a professional approach.

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