OECD Guidelines on Corporate Governance of State Owned Enterprises

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OECD Guidelines on Corporate Governance of State
Owned Enterprises

• Lars Johan Cederlund
• Senior advisor
• Ministry of Industry, Employment and
  Communications, Sweden
• Chairman OECD Working Group on Privatisation and
  Corporate Governance of State Owned Assets

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The Guidelines and the role of SOEs

• Direct application in commercial SOEs
• Focus on federal or state-owned SOEs
• Comparative report gives information
• Comparative report allows benchmarking

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Why Guidelines?

• Need for an integrated Corporate Governance
  model, best practice collection
• Contribution to growth from professional
  governance of SOEs
• Better balance between privatisation and
  governance was asked for by politicians

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SOE employees as percentage of total employment
in OECD countries
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Turnover/GDP and value added/GDP for SOEs in OECD
countries (percent)
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Percentage of market capitalisation in OECD
countries
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New Corporate Governance model

• Complement to the OECD Principles of Corporate
  Governance which are developed for
  privately-owned companies
• Non-binding guidelines, agreed by member states
  for their proper activities, best practice
• The Guidelines is an integrated product, with
  individual Guidelines linked/connected to the
  others
• Do not preclude/alter Privatisation policies

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Priorities

• Level-playing field with the private sector
• Reinforcing the ownership function
• No mixing of political and business decisions
• Improving transparency
• Empowering SOE boards

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Chapter I, Legal and regulatory framework

• Separate regulation and shareholding
• Transparency on special obligations
• Level-playing field in markets
• Competitive conditions in access to finance

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Chapter II The state as an Owner

• Clear and disclosed ownership policy
• No direct interference in day-to-day activities
• Let boards carry out their responsibilities
• Centralisation/coordination of the ownership
  function
• Accountability secured
• Effective exercise of ownership rights

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Chapter III Other Shareholders

• All shareholders should be treated equitably
• High degree of transparency towards all
  shareholders
• Facilitate participations in AGM for minority
  shareholders

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Chapter IV Stakeholders

• Rely on OECD Principles of Corporate Governance
• Report on stakeholder relations
• Develop, implement and communicate compliance
  with codes of ethics

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Chapter V Transparency

• Basis for much of the other Guidelines
• Disclosure at ownership level and at company
  level
• Internal audit
• Independent external audit
• High quality standards for accounting and audit
• Disclosure as listed companies
• Disclosure of material information, including
  objectives, ownership and voting rights,
  financial assistance from the state transactions
  with related entities and risk factors

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Chapter VI Boards

• Critical governance organ
• Full responsibility
• Able to appoint CEO
• Act in the best interest of the company
• Independent judgement
• Good corporate governance standards
• Systematic evaluation

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Possible effects of the Guidelines

• Basis for structured reform
• Facilitate benchmarking
• Awareness of important values on the states
  balance sheet
• Better value-creation due to more effective
  corporate governance