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JOURNÉE D’ÉTUDE: « GOUVERNANCE
DES SOCIÉTÉS D’ÉTAT ET LE RÔLE DES
CONSEIL D’ADMINISTRATION »
Presentation by Hans Christiansen, Deputy Head of
Division, OECD.
July 12, 2021
The OECD Guidelines on Corporate Governance of State-Owned
Enterprises (“SOE Guidelines”)
• An OECD instrument. All OECD countries must
associate themselves with the recommendations laid
down in the Guidelines.
• Addressed to the SOE ownership. The Guidelines
makes recommendations to policy makers and public
officials responsible for exercising the ownership of
enterprises.
• Non-binding. No government or SOE is in any given
situation legally obliged to follow the Guidelines.
• Not limited to OECD members. Any country can,
following a review of its national SOE sector, become
an adherent to the Guidelines and participate fully in
OECD’s work on SOEs.
2
• The Working Party is the world’s only standing body of “SOE practitioners” from national
capitals. We meet twice per year.
The OECD Guidelines on Corporate Governance of State-Owned
Enterprises
3
Good
corporate
governance
A rules-
based
environment
Clear roles
and
objectives
Strong
ownership
function
Equitable
treatment of
shareholders
Transparency
and
disclosure
Stakeholder
relationship
Independent
Boards of
directors
The OECD SOE Guidelines concerning the state’s
role as an owner
• The Government should develop an ownership policy. The policy will
specify rationales for ownership, implementation mechanisms and the respective
roles of different government offices. (Guideline I.B)
• The exercise of ownership rights should be centralised in a single
ownership entity, or, if this is not possible, carried out by a
coordinating body. Ownership should always be exercised on a whole-of-
government basis.
• The government should allow SOEs full operational autonomy to
achieve their defined objectives and refrain from intervening in SOE
management. The government acts as an active and informed owner, but at
arm’s length from the company.
The “ownership function” of SOEs is defined as an entity that exercises the
following faculties: The power, responsibility, or steering ability to
(1) appoint boards of directors; (2) set and monitor objectives; and (3) to
vote company shares on behalf of the government
The “OECD model”: Separation of Roles
Independent
regulation
Government
• Sets ownership policy
• Coordinates at cabinet level
Ownership
Unit
• Defines objectives for individual SOEs
• Monitors performance
SOE Board
• Approves strategy
• Monitors management
Management
• Runs the company
Summary of main OECD Recommendations on
the responsibilities of the boards of directors
(Chapter VII)
Board
Nomination
Board
composition
Board powers
The boards of SOEs should have the necessary authority, competencies and objectivity to carry out their
functions of strategic guidance and monitoring of management. They should act with integrity and be held
accountable for their actions
The decision to nominate members to SOE boards should be supported by transparent and
consistent methods for nominating candidates to the board. These methods can include:
• Setting clear minimum criteria for board nominations
• Informally vetting or advising on ministerial board nominations
• Establishing nomination committees
• SOE boards of directors should be composed so that they can exercise professional,
objective and independent judgment. SOEs must strike a sometimes-delicate balance
when choosing directors, so that the board can effectively steer the SOE toward meeting
the interests of both the enterprise and its shareholder.
• SOE boards should effectively carry out their functions of setting strategy and
supervising management, based on broad mandates and objectives set by the
government.
• SOE boards should have the power to appoint and remove the company’s top executive
management, including the CEO.
Board
evaluation and
controls
• SOE boards should, under the Chair’s oversight, carry out an annual, well-structured
evaluation to appraise their performance and efficiency.
• SOEs should develop efficient internal audit procedures and establish an internal audit
function that is monitored by and reports directly to the board and to the audit committee
or the equivalent corporate organ.
Recent progress on SOE board practices
 Two thirds of the 31 reviewed countries have made notable
efforts and progress in enhancing SOE board governance in
the last five years.
0 1 2 3 4 5 6 7 8 9
Progress in the extent to which SOEs have established
specialised committees to support the board of directors
Progress in the composition of boards of directors across the
national SOE sector
Progress in the roles of SOE boards of directors, as
established in legislation or by relevant regulations or
owner's expectations
No. of countries with recent progress in SOE board practices
OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of
Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en
Key progress on SOE board practices
• Half of the reviewed countries reported they had established minimum
qualification criteria for board members.
• A couple of Scandinavian countries have established a comprehensive board
nomination framework to empower SOE boards to appoint the chief
executive officer, while other reviewed countries have aimed to do so to a certain
extent.
• A quarter of the reviewed countries have re-arranged or improved their board
nomination practices, through centralising the powers of nomination or
increasing the number of independent directors.
• One third of the reviewed countries have implemented rules for the
remuneration of either senior management or boards of directors
(or both).
• Continued or stronger emphasis on gender equality on SOE boards
is noted in one third of the reviewed countries.
• It is also notable that some of the countries that have undertaken SOE reviews
or undergone OECD accession negotiations have made significant progress with
regard to professionalising board of directors of SOEs
OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of
Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en
Institutions responsible for the appointment and
election of SOE board members
Sources : OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments,
OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en
OECD (2020), “Organising the State Ownership Function”, http://www.oecd.org/corporate/organising-state-ownership-function.pdf
Institutions responsible for the appointment and election of SOE board members in 37 countries
0 2 4 6 8 10 12 14
5. Other
4. Sectorial ministries and the centralized ownership function or
ministries of finance
3. Sectorial ministries, with signoff from a wider group of ministers,
the Cabinet or Head of State
2. Sectorial ministries
1. Centralized ownership function
• In countries where the state enterprise ownership function is centralized one minister may be in charge of the
ownership function, including nominating members to SOE boards.
• In other countries, the responsibility for board nominations is shared between the agency exercising the state
enterprise ownership function and sectorial ministries. To varying degrees, this is the practice pursued in the
countries with Twin Track Model or Dual Model.
• Where ownership is more decentralised, line ministries are more often responsible for nominations, though parts of
the general government responsible for public finance may maintain the right to appoint one or more representatives
to the board. In these cases, it is good practice to subject ministerial decisions concerning board nominations to
some form of consensus by a wider group of ministers, the Cabinet or Head of State.
National examples on professionalising boards of
directors of SOEs
Costa Rica passed a Presidential Decree to better
define board member profiles and the roles and
responsibilities of board members. The government
also initiated a comprehensive training programme for
existing and prospective SOE board members, key
executives and certain government officials with the
goal of developing a better shared understanding of
their roles and their decision-making authorities.
Latvia With the 2015 adoption of the Law on
Governance of Capital Shares of a Public Person and
Capital Companies and the regulation of Cabinet of
Ministers regarding the procedures for nomination of
the members of the board and the council, the board
nomination practices are publicly announced and the
nomination committee should be established to
decide on a detailed criteria and evaluation
procedure, conduct evaluation of candidates and
nominate candidates for election.
Switzerland’s Federal Council established guidelines
for the representation of national
languages and gender on boards (e.g. at least 30%
males and females on the boards) in 2013 . The
ownership entities are required to state the measures
taken and to be taken, if they fail to meet the
requirements for gender and language regional
representation. In 2015, a model requirement profile
for board members was published. It defines the
requirement for the board as a body, for the individual
board members and for the president of the board.
Estonia established a Nomination Committee in the
Finance Ministry in 2017 with an
objective to make competence-based choices for
supervisory boards. Since the foundation of the
committee, presence of representatives with
experience in private sector in supervisory boards has
significantly increased.
Resources
For more information on OECD work on state-owned enterprises, please visit:
http://www.oecd.org/corporate/soes/
11

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Mr Hans CHRISTIANSEN, Senior Economist at OECD « Boards of directors in state-owned enterprises: learning from international best practices »

  • 1. JOURNÉE D’ÉTUDE: « GOUVERNANCE DES SOCIÉTÉS D’ÉTAT ET LE RÔLE DES CONSEIL D’ADMINISTRATION » Presentation by Hans Christiansen, Deputy Head of Division, OECD. July 12, 2021
  • 2. The OECD Guidelines on Corporate Governance of State-Owned Enterprises (“SOE Guidelines”) • An OECD instrument. All OECD countries must associate themselves with the recommendations laid down in the Guidelines. • Addressed to the SOE ownership. The Guidelines makes recommendations to policy makers and public officials responsible for exercising the ownership of enterprises. • Non-binding. No government or SOE is in any given situation legally obliged to follow the Guidelines. • Not limited to OECD members. Any country can, following a review of its national SOE sector, become an adherent to the Guidelines and participate fully in OECD’s work on SOEs. 2 • The Working Party is the world’s only standing body of “SOE practitioners” from national capitals. We meet twice per year.
  • 3. The OECD Guidelines on Corporate Governance of State-Owned Enterprises 3 Good corporate governance A rules- based environment Clear roles and objectives Strong ownership function Equitable treatment of shareholders Transparency and disclosure Stakeholder relationship Independent Boards of directors
  • 4. The OECD SOE Guidelines concerning the state’s role as an owner • The Government should develop an ownership policy. The policy will specify rationales for ownership, implementation mechanisms and the respective roles of different government offices. (Guideline I.B) • The exercise of ownership rights should be centralised in a single ownership entity, or, if this is not possible, carried out by a coordinating body. Ownership should always be exercised on a whole-of- government basis. • The government should allow SOEs full operational autonomy to achieve their defined objectives and refrain from intervening in SOE management. The government acts as an active and informed owner, but at arm’s length from the company. The “ownership function” of SOEs is defined as an entity that exercises the following faculties: The power, responsibility, or steering ability to (1) appoint boards of directors; (2) set and monitor objectives; and (3) to vote company shares on behalf of the government
  • 5. The “OECD model”: Separation of Roles Independent regulation Government • Sets ownership policy • Coordinates at cabinet level Ownership Unit • Defines objectives for individual SOEs • Monitors performance SOE Board • Approves strategy • Monitors management Management • Runs the company
  • 6. Summary of main OECD Recommendations on the responsibilities of the boards of directors (Chapter VII) Board Nomination Board composition Board powers The boards of SOEs should have the necessary authority, competencies and objectivity to carry out their functions of strategic guidance and monitoring of management. They should act with integrity and be held accountable for their actions The decision to nominate members to SOE boards should be supported by transparent and consistent methods for nominating candidates to the board. These methods can include: • Setting clear minimum criteria for board nominations • Informally vetting or advising on ministerial board nominations • Establishing nomination committees • SOE boards of directors should be composed so that they can exercise professional, objective and independent judgment. SOEs must strike a sometimes-delicate balance when choosing directors, so that the board can effectively steer the SOE toward meeting the interests of both the enterprise and its shareholder. • SOE boards should effectively carry out their functions of setting strategy and supervising management, based on broad mandates and objectives set by the government. • SOE boards should have the power to appoint and remove the company’s top executive management, including the CEO. Board evaluation and controls • SOE boards should, under the Chair’s oversight, carry out an annual, well-structured evaluation to appraise their performance and efficiency. • SOEs should develop efficient internal audit procedures and establish an internal audit function that is monitored by and reports directly to the board and to the audit committee or the equivalent corporate organ.
  • 7. Recent progress on SOE board practices  Two thirds of the 31 reviewed countries have made notable efforts and progress in enhancing SOE board governance in the last five years. 0 1 2 3 4 5 6 7 8 9 Progress in the extent to which SOEs have established specialised committees to support the board of directors Progress in the composition of boards of directors across the national SOE sector Progress in the roles of SOE boards of directors, as established in legislation or by relevant regulations or owner's expectations No. of countries with recent progress in SOE board practices OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en
  • 8. Key progress on SOE board practices • Half of the reviewed countries reported they had established minimum qualification criteria for board members. • A couple of Scandinavian countries have established a comprehensive board nomination framework to empower SOE boards to appoint the chief executive officer, while other reviewed countries have aimed to do so to a certain extent. • A quarter of the reviewed countries have re-arranged or improved their board nomination practices, through centralising the powers of nomination or increasing the number of independent directors. • One third of the reviewed countries have implemented rules for the remuneration of either senior management or boards of directors (or both). • Continued or stronger emphasis on gender equality on SOE boards is noted in one third of the reviewed countries. • It is also notable that some of the countries that have undertaken SOE reviews or undergone OECD accession negotiations have made significant progress with regard to professionalising board of directors of SOEs OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en
  • 9. Institutions responsible for the appointment and election of SOE board members Sources : OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en OECD (2020), “Organising the State Ownership Function”, http://www.oecd.org/corporate/organising-state-ownership-function.pdf Institutions responsible for the appointment and election of SOE board members in 37 countries 0 2 4 6 8 10 12 14 5. Other 4. Sectorial ministries and the centralized ownership function or ministries of finance 3. Sectorial ministries, with signoff from a wider group of ministers, the Cabinet or Head of State 2. Sectorial ministries 1. Centralized ownership function • In countries where the state enterprise ownership function is centralized one minister may be in charge of the ownership function, including nominating members to SOE boards. • In other countries, the responsibility for board nominations is shared between the agency exercising the state enterprise ownership function and sectorial ministries. To varying degrees, this is the practice pursued in the countries with Twin Track Model or Dual Model. • Where ownership is more decentralised, line ministries are more often responsible for nominations, though parts of the general government responsible for public finance may maintain the right to appoint one or more representatives to the board. In these cases, it is good practice to subject ministerial decisions concerning board nominations to some form of consensus by a wider group of ministers, the Cabinet or Head of State.
  • 10. National examples on professionalising boards of directors of SOEs Costa Rica passed a Presidential Decree to better define board member profiles and the roles and responsibilities of board members. The government also initiated a comprehensive training programme for existing and prospective SOE board members, key executives and certain government officials with the goal of developing a better shared understanding of their roles and their decision-making authorities. Latvia With the 2015 adoption of the Law on Governance of Capital Shares of a Public Person and Capital Companies and the regulation of Cabinet of Ministers regarding the procedures for nomination of the members of the board and the council, the board nomination practices are publicly announced and the nomination committee should be established to decide on a detailed criteria and evaluation procedure, conduct evaluation of candidates and nominate candidates for election. Switzerland’s Federal Council established guidelines for the representation of national languages and gender on boards (e.g. at least 30% males and females on the boards) in 2013 . The ownership entities are required to state the measures taken and to be taken, if they fail to meet the requirements for gender and language regional representation. In 2015, a model requirement profile for board members was published. It defines the requirement for the board as a body, for the individual board members and for the president of the board. Estonia established a Nomination Committee in the Finance Ministry in 2017 with an objective to make competence-based choices for supervisory boards. Since the foundation of the committee, presence of representatives with experience in private sector in supervisory boards has significantly increased.
  • 11. Resources For more information on OECD work on state-owned enterprises, please visit: http://www.oecd.org/corporate/soes/ 11