Corporate governance, state-owned enterprises : a survey of OECD countries

232 Pages·2005·1.795 MB·English

by  OECD

«
C
Corporate Governance of State-Owned O Corporate Governance
R
Enterprises P
O of State-Owned
R
A SURVEY OF OECD COUNTRIES A
T Enterprises
E
Globalisation has heightened the need to enhance the corporate governance G
O
of state-owned enterprises (SOEs) in many countries, especially where SOEs V
E
significantly affect economic performance because of their weight in the national R
economy. N
A A SURVEY OF OECD COUNTRIES
N
This survey provides a broad comparative overview of SOE governance in C
E
OECD countries today. It provides a wealth of information, including examples O
of successes and failures of past reform efforts. It highlights the key challenges F
S
to be addressed by the state as a corporate owner and provides a framework T
A
to help governments assess and improve the way they exercise their ownership T
E
function and ensure a level-playing field for private and state-owned enterprises. It -
O
also shows the importance of making progress in transparency and disclosure by
W
SOEs and strengthening SOE governing boards. N
E
D
Based on extensive research in OECD countries, this survey underpinned E
development of the OECD Guidelines on Corporate Governance of State-Owned N
T
Enterprises, adopted in April 2005, which established the first international E
R
benchmark in this area. P
R
IS
For any questions or information concerning this survey or the OECD Guidelines E
S
on Corporate Governance of State-Owned Enterprises, please contact the
Corporate Affairs Division at: corporate.affair.oecd.org. For more information on A

S
OECD’s work on privatisation and corporate governance of state-owned assets,
u
visit: www.oecd.org/daf/corporate-affairs/soe/. rv
e
y

The full text of this book is available on line via these links: o
f

http://www.sourceoecd.org/governance/9264009426 O
http://www.sourceoecd.org/industrytrade/9264009426 E
C
D
Those with access to all OECD books on line should use this link:
C
http://www.sourceoecd.org/9264009426
o
u
n
SourceOECD is the OECD’s online library of books, periodicals and statistical databases. t
For more information about this award-winning service and free trials ask your librarian, rie
or write to us at [email protected]. s
www.oecd.org
ISBN 92-64-00942-6 -:HSTCQE=UU^YWY:
26 2005 02 1 P

Corporate Governance
of State-Owned
Enterprises
A SURVEY OF OECD COUNTRIES
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments of 30 democracies work
together to address the economic, social and environmental challenges of globalisation.
The OECD is also at the forefront of efforts to understand and to help governments
respond to new developments and concerns, such as corporate governance, the
information economy and the challenges of an ageing population. The Organisation
provides a setting where governments can compare policy experiences, seek answers to
common problems, identify good practice and work to co-ordinate domestic and
international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, the
Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand,
Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey,
the United Kingdom and the United States. The Commission of the European
Communities takes part in the work of the OECD.
OECD Publishing disseminates widely the results of the Organisation’s statistics
gathering and research on economic, social and environmental issues, as well as the
conventions, guidelines and standards agreed by its members.
This work is published on the responsibility of the Secretary-General of
the OECD. The opinions expressed and arguments employed herein do not
necessarily reflect the official views of the Organisation or of the governments
of its member countries.
Publié en français sous le titre:
Gouvernance des entreprises publiques
PANORAMA DES PAYS DE L’OCDE
© OECD 2005
No reproduction, copy, transmission or translation of this publication may be made without written permission.
Applications should be sent to OECD Publishing: [email protected] or by fax [phone]. Permission to photocopy a
portion of this work should be addressed to the Centre français d'exploitation du droit de copie, 20, rue des
Grands-Augustins, 75006 Paris, France ([email protected]).
FOREWORD
Foreword
W
ith state-owned enterprises continuing to play a significant role in many OECD
economies and key infrastructure sectors, the quality of their governance is attracting
increasing attention. Problems of undue political interference, passive boards and
inadequate transparency have prompted public concern, and a number of serious
efforts at reform.
Provided they are soundly structured and effectively implemented, reforms can
enhance economic growth potential by improving SOE efficiency and their access to capital,
while contributing to fair competition by ensuring a level-playing field between companies
in the private and public sectors. Better corporate governance of SOEs can also strengthen
overall public governance through better transparency and alleviate the fiscal burden.
Governments face complex issues and trade-offs in designing reforms to achieve both
sound organisation of the ownership function within the state administration and its
effective exercise. They need an active ownership policy while avoiding undue interference
in the day-to-day management of SOEs. They also need a chain of accountability that
ensures that SOE boards and management make responsible decisions and that
guarantees appropriate disclosure of information to the general public.
To help governments meet these challenges and achieve high standards of SOE
governance, the OECD adopted Guidelines on the Corporate Governance of State-
Owned Enterprises (April2005) which have been widely endorsed and warmly
welcomed by OECD and non-OECD governments. The Guidelines complement the
OECD Corporate Governance Principles (Revised 2004) which is the recognised
international benchmark for good corporate governance.
This report Corporate Governance of State-Owned Enterprises: A Survey of OECD
Countries provides a comprehensive inventory of current practices and recent
developments. Published under the authority of the OECD Working Group on Privatisation
and Corporate Governance of State-Owned Assets, the report illustrates the different policy
options available to governments in exercising their ownership rights and includes
references to official reports by state auditors, parliaments or ownership entities. This
information was invaluable during the development of the Guidelines and can now be
used by policy makers and practitioners as a reference when reflecting on their own
practices and in shaping future reforms. The OECD will use the report and the Guidelines
as it continues to promote good governance of state-owned enterprises through policy
dialogue meetings with OECD and non-OECD countries. The report will also provide a
solid basis for assessing the reforms now being undertaken.
William H. Witherell
Director for Financial and Enterprise Affairs
CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES – ISBN 92-64-00942-6 – © OECD 2005 3

TABLE OF CONTENTS
Table of Contents
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Part I
Comparative Report
Chapter 1. Scale and Scope of State-owned Enterprises
inOECD Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rationale and history of state-owned enterprises . . . . . . . . . . . . . . . . 20
Large privatisations in the1980s and in the1990s . . . . . . . . . . . . . . . . 22
A smaller but still significant state sector . . . . . . . . . . . . . . . . . . . . . . . 23
Ownership structure of SOE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SOE remain key players in a number of important sectors . . . . . . . . . 34
The legal form of SOEs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Chapter 2. The Organisation of the Ownership Function
within the State Administration . . . . . . . . . . . . . . . . . . . . . . . . . 41
Three main types of organisation and the global evolution
oftheownership function. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
The decentralised or “sector ministry” model. . . . . . . . . . . . . . . . . . . . 43
The dual ministry model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
The centralised model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Other specific structures involved in exercising the ownership
function of SOEs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Chapter 3. Relationship of State-owned Enterprises
withother Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Reference to the general legal framework . . . . . . . . . . . . . . . . . . . . . . . 71
Strengthened decision making powers within GSMs or boards . . . . . 72
Ex ante rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Information rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Right of redress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES – ISBN 92-64-00942-6 – © OECD 2005 5
TABLE OF CONTENTS
The state as a minority but dominant shareholder:
the case of“golden shares”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Chapter 4. The Role of Stakeholders in Corporate Governance. . . . . . . . . 79
The legal framework regarding stakeholders relationships. . . . . . . . . 80
Employee representation on SOE boards . . . . . . . . . . . . . . . . . . . . . . . . 82
The rights of creditors: insolvency/bankruptcy procedures . . . . . . . . 84
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Chapter 5. Transparency and Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Ex ante disclosure: setting up and reporting on objectives. . . . . . . . . . 89
Ex post disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Aggregate disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Accounting and auditing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
From scattered control to risk monitoring . . . . . . . . . . . . . . . . . . . . . . . 113
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Chapter 6. The Board of Directors of a State-Owned Enterprise. . . . . . . . 121
Board structure and size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Board composition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
The nomination process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Board functions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Work of boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Board evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Board remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Annex I.1. OECD State-owned Enterprises acrossStrategic
Service Sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Annex I.2. Legal Status of State-owned Enterprises . . . . . . . . . . . . . . . . . . . 161
Annex I.3. Transparency and Disclosure/Synthesis Table . . . . . . . . . . . . . . 164
Annex I.4. Synthesis Table/Board Composition. . . . . . . . . . . . . . . . . . . . . . . 168
Annex I.5. Synthesis Table/Board Functions . . . . . . . . . . . . . . . . . . . . . . . . . 172
Annex I.6. Synthesis Table/CEO Appointment andRemuneration. . . . . . . 175
Part II
OECD Guidelines on Corporate Governance
of State-owned Enterprises
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
6 CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES – ISBN 92-64-00942-6 – © OECD 2005
TABLE OF CONTENTS
1. Ensuring an Effective Legal and Regulatory Framework
for State-Owned Enterprises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Annotations to Chapter 1: Ensuring an Effective Legal and Regulatory
Framework for State-Owned Enterprises. . . . 186
2. The State Acting as an Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Annotations to Chapter 2: The State Acting asan Owner. . . . . . . . . . . . 192
3. Equitable Treatment of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Annotations to Chapter 3: Equitable Treatment of Shareholders. . . . . . 202
4. Relations with Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Annotations to Chapter 4: Relations with Stakeholders . . . . . . . . . . . . . 206
5. Transparency and Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Annotations to Chapter 5: Transparency and Disclosure . . . . . . . . . . . . 212
6. The Responsibilities of the Boards ofState-Owned Enterprises . . . 219
Annotations to Chapter 6: The Responsibilities of the Boards
ofState-Owned Enterprises. . . . . . . . . . . . . . 220
Annex II.1. Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
List of boxes
1.1. Discrepancies among data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.2. France: Evolution of EDF and GDF legal status . . . . . . . . . . . . . . . . . . 37
1.3. The importance of SOEs in non-member countries. . . . . . . . . . . . . . 38
2.1. The dual model in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.2. The Korean ownership function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.3. Australian reforms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.4. UK developments: creation, evolution and model
ofthe Shareholder Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.5. French reforms: main findings fromtheBarbierdelaSerre
Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2.6. French reforms: main recommendations oftheDouste-Blazy
Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.7. Reinforcing expert teams with the new French APE. . . . . . . . . . . . . . 58
2.8. The Finnish reform: main findings fromtheVuoriaReport . . . . . . . 59
2.9. The Austrian ÖIAG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
2.10. The Czech NPF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
2.11. The Italian Advisory Unit, SICOT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
2.12. The Australian Government Business andPrivateFinancing
Advice Unit (GBPFAU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES – ISBN 92-64-00942-6 – © OECD 2005 7
TABLE OF CONTENTS
2.13. The New Zealand CCMAU. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
2.14. The dual model in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.1. The election system in Italian listed SOEs –Voto di lista . . . . . . . . . . 74
5.1. Economic Value-Added (EVA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
5.2. Provisions of performance contracts for SOEs inFrance. . . . . . . . . . 93
5.3. Negotiation of corporate objectives (SCI) inNewZealand. . . . . . . . . 94
5.4. Why combined accounts and not consolidated accounts
in France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.5. Ownership entity Annual Reports in Germany, Norway, Sweden
and France. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
5.6. A lot of control but poor monitoring: the French case. . . . . . . . . . . . 114
5.7. Guiding principles for managing risk inaustralianSOEs (GBEs) . . . 117
6.1. The Polish experience: specific examinations forState
representatives on SOE boards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
6.2. SOE boards nomination process in Australia. . . . . . . . . . . . . . . . . . . . 131
6.3. Mitigating political influence on GIE management and its effect
on boards in South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
6.4. UK Code of Practice for Ministerial appointments . . . . . . . . . . . . . . . 134
6.5. Crown company boards appointment process inNewZealand. . . . 136
6.6. President Recommendation Committees inKorea’sGOCs . . . . . . . . 141
6.7. The Swedish rules of procedure for SOE boards . . . . . . . . . . . . . . . . . 144
6.8. Practical Advice for State Representatives inFrenchSOEs . . . . . . . . 145
6.9. Recommendations for the establishment and work ofaudit
committees in French SOEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
6.10. Selected best practices for the audit committees inCanada’s
crown corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
6.11. SOE board remuneration methodology inNewZealand . . . . . . . . . . 153
List of tables
2.1. Types of organisation of the state ownership function
inOECDcountries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.2. Debate on the sole/dual model in Australia. . . . . . . . . . . . . . . . . . . . . 49
4.1. Election systems for employee representatives . . . . . . . . . . . . . . . . . 83
4.2. Remuneration of employee representatives into boards. . . . . . . . . . 84
5.1. Examples of ownership entities Web sites. . . . . . . . . . . . . . . . . . . . . . 108
5.2. Examples of ownership policy documents. . . . . . . . . . . . . . . . . . . . . . 109
5.3. External audits and specific State control . . . . . . . . . . . . . . . . . . . . . . 112
6.1. New limits on the size of SOE boards . . . . . . . . . . . . . . . . . . . . . . . . . . 123
6.2. State representation in SOEs per ownership model. . . . . . . . . . . . . . 124
6.3. Employee board level representation in SOEs . . . . . . . . . . . . . . . . . . . 126
6.4. Board duties in New Zealand and Korea . . . . . . . . . . . . . . . . . . . . . . . 139
6.5. Examples of minimum number of SOE board meetings . . . . . . . . . . 143
8 CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES – ISBN 92-64-00942-6 – © OECD 2005