Shipping article(s)
May 20, 2024

The chief executive of Adhira Shipping and Logistics (ASL), Pappu Sastry, 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.


He noted that 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 Sastry, managers are often under commercial pressure to carefully manage costs, maximise profitability, and ensure the safe operations of the ships in their fleet while retaining contracts from owners.


He noted that while most ship owners are responsible and collaborate with managers to ensure that their vessels are operated safely and securely, many special-purpose vehicles set up to acquire ships do not share the same commitment.


"These entities give little or no thought to maintaining the ships they charter and take a very narrow commercial approach, distancing themselves from the responsibility of effectively running the vessel and directing its employment and trading patterns."


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


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


To resolve this disconnect, Sastry said every shipping company should be made responsible for its decisions and the reasons for its instructions. The structure of a board 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 company's operations and a governing body, with the directors 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 for a ship operating company," the statement said.


It added that this will standardise the shipping company’s responsibilities and ensure a professional approach.

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