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State-Owned Enterprises: Structure and Governance

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Practice Advice on Strategy and Structure

State-Owned Enterprises: Structure and Governance (OECD)

Summary AdviceThe reform trends in almost all OECD countries have been towards streamlining the operational form of government business activities, towards a more complete corporatisation of state owned enterprises (SOEs) and other commercial entities. A number of commercial activities previously operated by government departments or as statutory corporations have in the course of this process been subjected to the disciplines of corporate law and in some cases stock market listing. This has limited their scope for anti-competitive practices and non-commercial objectives more generally. Similar benefits have arisen from separation of ownership from regulatory functions in a number of jurisdictions. The selfregulating monopoly operators (especially in the network industries) of an earlier era have in many cases been replaced by corporations overseen by independent sector and competition regulators.

Main Points:

SOE Guidelines

  • The legal form of SOEs should be based as much as possible on corporate law;
  • Avoid creating a separate legal status, unless “absolutely necessary” to achieve stated objectives;
  • Governance bodies should have clear authority for steering the company; and,
  • Respect transparency and disclosure obligations.

Principles for Corporate Governance

  • establishing a distinct legal status, preferably according to ordinary company law or else by corporate charter or statutory authorisation;
  • identifying a clear relationship with the government and government ownership; and,
  • full awareness of obligations by SOE management to play by rules of the market place.

The Role of Oversight Institutions and Regulatory Functions

  • An unambiguous separation between the state ownership functions and other state functions that influence market conditions;
  • Separation of ownership from the regulatory authority, particularly with regard to market regulation; and,
  • A divorce from day-to-day management of SOEs, without intrusion on SOE board independence.

Source: OECD (2012). OECD, “Competitive Neutrality: A Compendium of OECD Recommendations Guidelines and Best Practices” at http://www.oecd.org/daf/corporateaffairs/50250955.pdf  (accessed 20 January 2013).  

Page Created By: Matthew Seddon on 20 January, 2013. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.


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© University of Toronto 2008
School of Public Policy and Governance