Corporate governance of state-owned enterprises

OECD Global Network on Privatisation and Corporate Governance of State-Owned Enterprises

 

Around the world, governments are important owners of commercial enterprises and assets. How well governments manage these assets has a great impact on the substantial values these enterprises represent and thus on a country’s public finances. Better performance of these enterprises is a positive factor for economic growth and competitiveness. In addition, state-owned enterprises often supply fundamental services such as water, electricity and transportation that private companies and all citizens depend upon for their competitiveness and welfare.

Many governments are therefore trying to improve the governance of their state-owned enterprises. There is an upcoming interest to improve the value creation and not destroy often important investments made by state-owned enterprises. In addition to this, pressure comes from the consumers who demand better services at lower cost and from private sector companies that require a level playing field when they compete with state-owned enterprises.

But while the benefits are obvious, there is still a great deal of uncertainty about how to formulate and implement effective ownership policies. Experiences and awareness of state corporate governance practices are still evolving, and governments are also uncertain of how to make the best possible use of the opportunities for privatisation that have emerged with internationalisation, market de-regulation and technological change. Also, the internationalisation of state-owned enterprises themselves raises important new issues in relation to cross-border investments and disclosure practices.

The OECD has been actively involved in promoting an international dialogue on privatisation and corporate governance of state-owned enterprises for many years. In 2005, OECD issued the OECD Guidelines on Corporate Governance of State-Owned Enterprises, which now serve as a global benchmark for countries introducing governance reforms in the state-owned sector. A large number of non-OECD economies have also participated in this work and made important contributions. The OECD Working Group on Privatisation and Corporate Governance of State Owned Assets considers such co-operation important in shaping the direction and content of its future work.

For this purpose, the Working Group is establishing a “Global Network,” involving participants from both OECD and non-member countries. The Network’s annual meetings provide a structured environment for initiatives to support improvements in the governance of SOEs and, where governments decide to privatise, ensure that it is done effectively. To date, building up awareness of the Guidelines and encouraging their use has mainly taken place through regional SOE networks (Asia, southern Africa, the Middle East and North Africa) and roundtables covering Latin America, Southeast Europe, Eurasia and Russia. The Global Network provides a mechanism for sustaining and enhancing such exchanges across all regions, as well as an opportunity to build knowledge of and contacts with a broader range of countries. It provides a means for better understanding of emerging new issues and trends in state ownership, and for reviewing priorities and approaches for implementing the Guidelines on such issues as transparency and accountability, ensuring effective processes for nomination of professional SOE board directors, as well as other issues flagged by Global Network members as important for future consideration.

 

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