Recent global crises and emerging policy priorities have renewed attention to the role of SOEs in advancing national objectives. Across many sectors and jurisdictions, SOEs are increasingly relied upon to strengthen resilience, support essential services and deliver strategic policy goals in the public interest. From energy security to sustainability or regional development, these mandates place SOEs at the centre of national policy agendas and underscore the importance of transparent, accountable, and well-governed frameworks for their implementation which underpin a level playing field.
Against this backdrop, this policy paper reviews practices in the design, governance and oversight of PPOs and PSOs. Drawing on the experiences of countries surveyed and the OECD Guidelines on Corporate Governance of State‑Owned Enterprises, it identifies common approaches and good practices. Key findings include:
Clarify ownership rationales and align them with SOE mandates. Country practices show that ownership rationales often extend beyond traditional public service delivery to include broader strategic objectives related to resilience, sustainability, regional development and industrial policies. Clear rationales help governments define the role SOEs may be expected to play and the specific mandates they are assigned. Where ownership rationales and mandates are poorly specified, SOEs may face overlapping objectives, weaker accountability and pose greater risks to competitive neutrality. Several countries, including Norway and Iceland, formalise ownership rationales and expectations through state ownership policies that classify SOEs according to their commercial and non-commercial mandates, and these policies are periodically reviewed in light of evolving policy priorities and market conditions.
Clearly distinguish PPO from PSO frameworks. Across countries, SOEs often combine commercial activities with broader policy mandates, particularly in sectors such as energy, transport and telecoms. Country practices show growing reliance on letters of expectation, contractual arrangements, public service agreements and formal mandates to define PSOs more clearly and distinguish them from broader policy objectives. Italy, for example, combines PSO-specific contracts with accounting separation requirements to strengthen transparency and oversight. Practices highlight the frequent coexistence and occasional tension between commercial and non‑commercial objectives. Effectively managing these trade‑offs requires active engagement and clear expectations by the state owner coupled with a strong role for SOE boards in balancing objectives and overseeing their implementation. For example, Colombia has introduced portfolio-level coordination mechanisms to help manage trade-offs across SOEs pursuing different policy objectives.
Design and monitor PPOs and PSOs through robust, performance‑oriented frameworks. National practices show that there are variations in how governments monitor the implementation of PPOs and PSOs, particularly regarding the use of key performance indicators and public accountability mechanisms. More developed frameworks combine clear mandates with time bound and measurable financial and non-financial performance indicators explicitly linked to SOEs’ main line of business. Such frameworks also help limit ad hoc mandates while preserving board autonomy in operational decision-making. For example, Korea applies a whole-of-government key performance indicator (KPI) framework coordinated by the Ministry of Economy and Finance, while Lithuania combines quarterly reporting with portfolio-wide oversight by the Governance Coordination Centre.
Apply transparent and proportionate financing and PSO compensation arrangements to safeguard competitive neutrality. Across most jurisdictions, while PPOs are generally expected to be pursued under commercial considerations, certain objectives may require targeted financing to be achieved due to strategic or public-interest objectives while still applying market-consistent return expectations, such as cost-of-capital methodologies. Australia, for example, requires commercial return assessments for state-funded investments, while several EU jurisdictions apply market-based methodologies to assess expected rates of return. At the same time, several countries have designed detailed methodologies that require transparent, proportionate and clearly defined PSO compensation frameworks based on net costs and separate accounting to safeguard against over‑ or under‑compensation and limit cross‑subsidisation. Croatia and Spain apply reconciliation and clawback mechanisms linked to audited costs, while Finland uses direct cost-compensation approaches. Country experiences also highlight continuing challenges where commercial and non-commercial activities coexist within the same SOE.
Enhance SOE and portfolio-level disclosures. A growing number of countries emphasise improving transparency and performance around SOEs’ PPO and PSO mandates, although disclosure frameworks remain uneven. Countries are increasingly combining SOE-level reporting with portfolio-wide disclosure by state ownership entities to strengthen accountability and public oversight. For example, Korea’s ALIO platform provides centralised disclosure of SOE performance information, while Sweden publishes portfolio-wide ownership reports linking SOE mandates with broader policy objectives.