Boards of directors of state-owned enterprises : an overview of national practices.

114 Pages·2013·2.398 MB·English

by  OECD

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Preface c
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Executive summary
AN OVERVIEW OF NATIONAL PRACTICES
Introduction
Chapter 1. The role of boards of directors
Chapter 2. Board nomination framework and practices
Chapter 3. Board composition: Constraints and guidelines
Chapter 4. Board training and induction
Chapter 5. Board remuneration
Chapter 6. Boardroom efficiency
Chapter 7. Board evaluations
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26 2013 01 1 P

Corporate Governance
Boards of Directors
of State-Owned
Enterprises
AN OVERVIEW OF NATIONAL PRACTICES
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FOREWORD
Foreword
T
his report provides practical guidance on board practices for directors of state-
owned enterprises and identifies a number of “good practices” based on national
experiences of a large number of participating countries. It extends the guidance
providedbyChapterVIoftheOECDGuidelinesontheCorporateGovernanceof
State-Owned Enterprises on the “Responsibilities of Boards of State-Owned
Enterprises”.The report draws information from a questionnaire-based exercise as
wellaspreviouspublicationsandbackgroundpaperscommissionedbytheOECD.
The report is an outcome of the OECDWorking Party on State Ownership and
PrivatisationPracticesprojecton“Enhancingtheroleoftheboardsofdirectorsofstate-
owned enterprises”. It was given final approval and declassified by theWP SOPP in
December2012.ThedraftreportwaspreparedbySaraSultanandHansChristiansenof
theCorporateAffairsDivisionoftheOECDDirectorateforFinancialandEnterpriseAffairs.
SubstantiveinputwasprovidedbyJimColvinactingasexternalconsultanttotheOECD.
Thedevelopmentofthereporthasalsobenefitedfromcomprehensiveconsultationswith
the Business and Industry Advisory Committee (BIAC), the Trade Union Advisory
Committee(TUAC),civilsociety,academiaandOECDpartnereconomies.
BOARDSOFDIRECTORSOFSTATE-OWNEDENTERPRISES:ANOVERVIEWOFNATIONALPRACTICES©OECD2013 3

TABLEOFCONTENTS
Table of contents
Preface ......................................................... 7
Acronymsandabbreviations...................................... 9
Executivesummary.............................................. 11
Introduction .................................................... 17
Chapter1.Theroleofboardsofdirectors............................ 21
Definingrolesandresponsibilities ............................. 22
Conformancevs.performance................................. 25
Addingvalue................................................ 26
Notes ...................................................... 27
Bibliography................................................. 27
Chapter2.Boardnominationframeworksandpractices .............. 29
Exercisingthenominationandappointmentpowers ............. 31
Identificationandselectionofboardmembers................... 33
TheroleoftheBoardinnomination............................ 38
Therelationshipwithnon-stateshareholders ................... 43
Notes ...................................................... 45
Bibliography................................................. 45
Chapter3.Boardcomposition:Constraintsandguidelines ............ 47
Maintainingboardobjectivityandindependence................. 50
Employeerepresentativesontheboard ......................... 53
Eligibilityrequirements....................................... 55
Notes ...................................................... 59
Bibliography................................................. 59
Chapter4.Boardtrainingandinduction............................. 61
Inductionfornewboardmembers ............................. 63
SpecifictrainingaimedatSOEs................................ 64
OfftheShelfdirectortrainingprogrammes...................... 65
Bibliography................................................. 66
BOARDSOFDIRECTORSOFSTATE-OWNEDENTERPRISES:ANOVERVIEWOFNATIONALPRACTICES©OECD2013 5
TABLEOFCONTENTS
Chapter5.Boardremuneration..................................... 67
Practicesandtrends.......................................... 68
Theroleofboardsinsettingremuneration...................... 71
Bibliography................................................. 71
Chapter6.Boardroomefficiency.................................... 73
Teamdynamics.............................................. 74
Workload................................................... 75
Sizelimits .................................................. 76
TheroleoftheChair ......................................... 78
Theuseofboardcommittees.................................. 79
Bibliography................................................. 80
Chapter7.Boardevaluations....................................... 81
Evaluationbytheownershipfunction .......................... 83
Boardselfreviews............................................ 85
Roleofexternalevaluators.................................... 86
Feedbackintonominationprocess ............................. 87
Bibliography................................................. 88
Annex.......................................................... 89
Tables
6.1. TeamdynamicsonSOEboards .............................. 75
6.2. Maximumboardsize....................................... 77
A.1. Nominationframework .................................... 90
A.2. Selectionandappointmentprocesses........................ 98
A.3. Remunerationofboardmembers............................ 104
A.4. Boardevaluationprocesses ................................. 107
Figures
1.1. Theroleoftheboardinathree-layergovernancestructure...... 23
2.1. NewZealandboardappointmentprocess..................... 36
3.1. Acontinuumofboardindependence......................... 50
6 BOARDSOFDIRECTORSOFSTATE-OWNEDENTERPRISES:ANOVERVIEWOFNATIONALPRACTICES©OECD2013
PREFACE
Preface
S
tate-owned enterprises (SOEs) are an essential element in the international
economic architecture. Across the OECD area and in emerging economies, they
continue to dominate certain segments of the economy that matter greatly for the
downstream competitiveness (notably in the utilities sector). In the face of growing
expectationsforimprovedperformance,policymakershavefocusedtheirattentionon
theroleofboardsofdirectors.
Boards of directors play a fundamental role in corporate stewardship and
performance.Overthelastdecade,OECDgovernmentshavesoughttoprofessionalise
boards,ensuretheirindependenceandshieldthemfromadhocpoliticalintervention.
Ingeneraltheseapproacheshaveworked;mostcountriesreportbetterqualityboard
discourseandultimatelyimprovedSOEperformance.Yet,moreremainstobedoneto
raise efficiency by implementing the aspirational standards of governance,
accountabilityandtransparencyestablishedbytheOECDGuidelinesonCorporate
GovernanceofState-OwnedEnterprises.
Taking the Guidelines as a starting point, this publication develops practical
guidanceonSOEboardpracticesaimedatpolicymakersandcorporatepractitioners.The
reportisbasedonactualcountrypractices,butitdoesnotlimititselftoprovidingan
overview of where we stand today. It takes important steps toward identifying what
remains to be achieved.This report does not advocate a one-size-fits-all approach:
different nationalapproachestoSOEownershipandoversight aretakenintoaccount
andtheirconsequencesforwhatconstitutesgoodboardpracticesareconsidered.
TheWorking Party on State Ownership and Privatisation Practices, the OECD
body which Ihave the privilege of chairing, continuously monitors developments in
this area. Assisting countries in implementing SOE board practices of the highest
possiblestandardispartofitsmandate.ThisworkisbynomeanslimitedtoOECD
membership.TheWorkingParty,initselfandthroughanumberofregionalnetworks
across the globe, offers a forum for all interested SOE practitioners to turn to for
inspirationandsupport.
Throughthisreport,Ifeelthatwehavetakenanimportantstepforwardtoward
identifyingstrongboardpracticesforstate-ownedenterprises.Iamconfidentthatpolicy
BOARDSOFDIRECTORSOFSTATE-OWNEDENTERPRISES:ANOVERVIEWOFNATIONALPRACTICES©OECD2013 7
PREFACE
makerswilltakestepstoundertakerelevantmeasuresinthisfield,andlookforwardto
engagingwithawiderangeofactorstowardtheimplementationofourfindings.
AndersBerg
Chair,WorkingPartyonStateOwnership
andPrivatisationPractices
DeputyDirectorGeneral,
NorwegianMinistryofTradeandIndustry
8 BOARDSOFDIRECTORSOFSTATE-OWNEDENTERPRISES:ANOVERVIEWOFNATIONALPRACTICES©OECD2013