Conference on ‘Governance and Board Effectiveness in Public            Sector Enterprises’ April11, 2012
State Ownership Steering- The Finland            Case Study                     By:           Olli V. Virtanen           V...
Background in Finland After the WW2 state involved in heavy industries    Forest industry, metal and engineering, mining...
Development phase (late 80s, early 90s) Politicians recognised and approved development Clean-up on Board of Directors ...
Structure of state ownership steering    126               PARLIAMENT                      74                             ...
CATEGORIES OF STATE HOLDINGS                     Strategic interest    Investor  interest               Companies with   C...
STRATEGIC INTREST     INVESTOR INTEREST               Companies with strategic            Companies with special assignmen...
Key principles of state ownership steering    No separate state ownership code    Principles of ownership in Government ...
Responsibilities of the Ownership Dept.Source: Ownership Department      Located in the Prime Ministers Office, but not u...
State role in SOEs                    OWNERSHIP STEERING               CS                                  CHAIR          ...
Premises and decision makingSource: Ownership department Essential legislation, corporate governance, government    resol...
Lessons learned Pragmatism Take your time Motivate population (voters) Focus on governance Define categories for diff...
Steps forward Step One    Owners will = Political will    Categorisation    Professionalism  roles and responsibilitie...
Olli V. Virtanen      Virtanen Associates Oy         Hiidenkuja 6 B 4           02750 Espoo              Finland          ...
Thank you Virtanen Associates Oy
Public Sector Governance by Mr Olli
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Public Sector Governance by Mr Olli

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Public Sector Governance by Mr Olli

  1. 1. Conference on ‘Governance and Board Effectiveness in Public Sector Enterprises’ April11, 2012
  2. 2. State Ownership Steering- The Finland Case Study By: Olli V. Virtanen Virtanen Associates Oy Virtanen Associates Oy
  3. 3. Background in Finland After the WW2 state involved in heavy industries  Forest industry, metal and engineering, mining, fertilisers, tele… SOEs accounted for about 20% of GDP (now 5-7%) Companies poorly run, heavily in debt, state budget financed, and helped with periodical devaluations Wake-up in the 1980s  Government statement on profitability in 1982 Concern over balance sheet and governance Virtanen Associates Oy
  4. 4. Development phase (late 80s, early 90s) Politicians recognised and approved development Clean-up on Board of Directors Abolishment of Supervisory Boards Strengthening of the balance sheet Stock market listings (SOEs)  No wholesale privatisations  Gradual expansion of ownership base International capital markets  Last restrictions on foreign ownership abolished in -93 Virtanen Associates Oy
  5. 5. Structure of state ownership steering 126 PARLIAMENT 74 OPPOSITION GOVERNMENT PRIME MINISTRY OF MINISTER’S DEVELOPMENT MINISTRIES OFFICE AID MINISTER IN CHARGE OWNERSHIP STEERING DEPT. Virtanen Associates Oy
  6. 6. CATEGORIES OF STATE HOLDINGS Strategic interest Investor interest Companies with Companies with Strategic Special importance assignment s
  7. 7. STRATEGIC INTREST INVESTOR INTEREST Companies with strategic Companies with special assignments importance COMPANIES OPERATING ON MARKET TERMS SPECIAL ASSIGNMENT COMPANIES1. OWNERSHIP STEERING UNDER THE PRIME MINISTER’S OFFICE 2. OWNERSHIP STEERING UNDER SEVERAL MINISTRIESGroup 1 a Group 1 b Group 2Altia Oyj Arctia Shipping Ltd) Alko Inc STMArek Oy Boreal Plant Breeding Ltd Arsenal Oyj VMArt and Design City Helsinki Oy Ekokem Oy Ab Certia Oy OKMDestia Ltd Fingrid Oyj CSC-IT Center for Science Ltd OKMEdita Plc Finnair Plc Finavia Corporation LVMFCG Finnish Consulting Group Oy Finnish Seed Potato Centre Finnpilot Pilotage Ltd LVMHelsinki Business and Science Park Ltd Ltd Finnvera Plc TEMKemijoki Oy Fortum Corporation Governia Oy VNKMint of Finland Ltd Gasum Corporation Hansel Ltd VMOpetusalan koulutuskeskus Educode Oy Itella Corporation HAUS Institute of Public Management Ltd VMRaskone Oy Municipality Finance Plc 1) Horse Institute Ltd OKM(11) Meritaito Ltd Solidium Oy VNK Motiva Oy Suomen Erillisverkot Oy, State Security VNK Neste Oil Corporation Networks Ltd Patria Holding Oyj Finnish Aviation Academy Ltd OKM Suomen Lauttaliikenne Oy Finnish Industry Investment Ltd TEM Suomen Viljava Oy Tietokarhu Oy VM Vapo Oy Finnish Fund for Industrial Cooperation Ltd UM VR-Group Ltd (FINNFUND) (18) Veikkaus, Finnish Lottery for Finns OKM Yleisradio - Finnish Broadcasting Company LVM Yrityspankki Skop Oyj (20) VM
  8. 8. Key principles of state ownership steering  No separate state ownership code  Principles of ownership in Government Resolution  Separation of regulatory and ownership functions  In listed companies no state priviligies  Commercial companies run on commercial basis  Efficiency and profitability  State support measures equal to all  In all companies professional non-executive board members  No politicians, maximum one civil servant  Candidate Bank Virtanen Associates Oy
  9. 9. Responsibilities of the Ownership Dept.Source: Ownership Department  Located in the Prime Ministers Office, but not under the Prime Minister  Directly accountable to the Minister responsible for Ownership Steering  Ownership strategy, analyses and monitoring, legal matters and communications  Independent organisation enables sufficient ability to react and exercise criticism Virtanen Associates Oy
  10. 10. State role in SOEs OWNERSHIP STEERING CS CHAIR 1Chinese wall CS APPOINTED CS 2 2 MEMBER OWNERSHIP SOE STEERING BOARD DEPARTMENT Virtanen Associates Oy
  11. 11. Premises and decision makingSource: Ownership department Essential legislation, corporate governance, government resolution and statement by the Cabinet Committee Parliament sets shareholding limits, allocates budget resources and approves incorporation arrangements Decisions on sales and acquisitions and on the overall governing principles are made in government plenary sessions The Minister responsible for Ownership Steering exercises the right of action and is accountable to the Government and Parliament Companies operating on market terms are under the Ownership Steering Department in the Prime Ministers Office Virtanen Associates Oy
  12. 12. Lessons learned Pragmatism Take your time Motivate population (voters) Focus on governance Define categories for different interests Find best people Remember national interests Virtanen Associates Oy
  13. 13. Steps forward Step One  Owners will = Political will  Categorisation  Professionalism roles and responsibilities  Legal framework  Code Step two  Competence, training  Evaluation  Driver’s licence Virtanen Associates Oy
  14. 14. Olli V. Virtanen Virtanen Associates Oy Hiidenkuja 6 B 4 02750 Espoo Finland Tel. +358-500-600462olli.virtanen@virtanenassociates.com www.virtanenassociates.com Virtanen Associates Oy
  15. 15. Thank you Virtanen Associates Oy

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