World Bank. 2014. Corporate Governance of State- Owned Enterprises: A Toolkit. DOI: 10.1596/978-1-4648-0222-5. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO
This toolkit provides an overarching framework for the corporate gover- nance of state-owned enterprises (SOEs), along with the tools and informa- tion for making practical improvements.1 Drawing on global good practices, reform experiences, and a growing body of knowledge, the toolkit is designed to assist practitioners in creating, implementing, and monitoring SOE corpo- rate governance reforms and in building the capacity to carry them out.
The primary audience for the toolkit is the government officials and SOE managers responsible for preparing and implementing SOE governance reforms. While the toolkit offers guidance on the policy and implementation challenges for this group in particular, it may also be a reference point for other stakeholders, including SOE employees, other regulatory bodies and institutions, the private sector, consumers, and citizens.
The toolkit focuses on commercial SOEs at the national level in which the government has significant control through full, majority, or substantial minority ownership. SOEs across a range of sectors—such as manufacturing and services, utilities, banks and other financial institutions, and natural resources—are included. Corporate governance issues and reform options are similar in most such companies, although there may be significant dif- ferences in emphasis by sector, which are highlighted where relevant. While the toolkit is focused mainly on commercial SOEs rather than noncommer- cial entities that fulfill special public policy purposes (whether or not in corporate form), the frameworks and tools may still be relevant. Similarly, although the toolkit does not cover municipal SOEs, many of the concepts and approaches are relevant for them as well.
Despite the fact that lessons on SOE corporate governance are still emerging, experience shows that no one strategy is universally applicable and that the choice of measures depends on country- and enterprise- specific circumstances. The toolkit thus provides a range of frameworks, concepts, case examples, checklists, and model documents that together aim to help government officials make the appropriate choices for their circumstances. Users of the toolkit should be better prepared for the fol- lowing activities:
- Understanding the concepts, benefits, challenges, and key issues related to designing and implementing SOE corporate governance reforms
- Choosing among available options and approaches based on prevailing economic, political, social, and financial circumstances
- Formulating policies and procedures for carrying out and monitoring SOE corporate governance reforms
- Managing the reform process, including prioritizing and sequencing of reforms, capacity building, and stakeholder engagement.
Structure of the Toolkit
The toolkit consists of nine chapters and a set of tools as described below:
Chapter 1, “Context and Overview.” This chapter provides the overall context for why countries the world over are undertaking SOE governance reform, focusing in particular on the importance and benefits of good corporate governance. In setting the context, the chap- ter provides an overview of past SOE reform efforts, the role and impor- tance of SOEs, the performance of SOEs and the broader economic and financial consequences, the governance challenges facing SOEs, the benefits of good corporate governance, and a framework for reform.
Chapters 2–8. These chapters address the key elements of corporate governance. Chapters 2–5 examine policy measures that can be adopted within the machinery of government to promote better SOE governance, while chapters 6–8 look at the internal governance arrangements in SOEs and how these can be optimized to ensure better financial and opera- tional performance and to protect minority shareholders in mixed- ownership companies.
- Chapter 2, “The Legal and Regulatory Framework.” This chapter focuses on how to establish and implement a sound legal and regulatory framework that becomes the foundation for good corporate governance, including through the passage of laws and regulations, ownership policies, and corporate governance codes.
- Chapter 3, “State Ownership Arrangements.” This chapter discusses how governments can improve their role as owner by setting up appropriate arrangements for exercising their core ownership rights. It examines dif- ferent ownership models and their pros and cons, offers a pathway for improving these arrangements, and identifies steps for ensuring their effectiveness.
- Chapter 4, “Performance Monitoring.” This chapter looks at how to moni- tor performance and hold SOEs accountable for results through the establishment of proper monitoring systems based on clearly defined mandates, strategies, and objectives with structured performance agree- ments and key performance indicators and targets.
- Chapter 5, “Financial and Fiscal Discipline.” This chapter examines the methods that governments can adopt to enhance the financial and fiscal discipline of SOEs, including through reducing preferential access to financing, identifying and separating public service obligations, and man- aging the fiscal burden and fiscal risk of SOEs.
- Chapter 6, “Board of Directors.” This chapter focuses on how to profes- sionalize SOE boards by developing a proper framework for board nomi- nations, clarifying and implementing board responsibilities, increasing board professionalism, developing board remuneration and evaluation policies, and providing director training.
- Chapter 7, “Transparency, Disclosure, and Controls.” This chapter addresses how to improve SOE transparency and disclosure, which are vital to hold- ing SOEs accountable for their performance. The chapter covers the guiding principles on transparency and disclosure, the reporting of finan- cial and nonfinancial information, the control environment, and the role of independent external audits.
- Chapter 8, “Special Issues in Mixed-Ownership Companies.” This chapter discusses key corporate governance issues that arise in mixed-ownership companies, including the need for assigning clear responsibility for over- seeing state minority shares, protecting the basic rights of minority share- holders, and promoting shareholder participation.
- Chapter 9, “Implementing Reform.” This chapter highlights the challenges of implementing reform and covers issues such as the phasing and sequencing of reforms, capacity building, stakeholder engagement, and the need for carrying out corporate governance reforms in parallel with broader SOE reforms.
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