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State-Owned Enterprises: Defining and Reviewing Mandates

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Practice Advice on Strategy and Structure

State-Owned Enterprises: Defining and Reviewing Mandates (OECD)

Summary Advice: The OECD reccomends that the state should also define and review the company mandate.

Main Points: This mandate is intended to be valid over a long period of time and updated only in the event of fundamental change of the company’s overall mission. The main steps in defining and reviewing SOE mandates:

Checking existing documents

  • A first step to clearly define SOE mandates is to check existing legal documents which either define the missions of SOEs or provide the general framework to do so.

Drafting the mandate

  • Based on these legal documents, the ownership entity could work out an appropriate formulation or redefinition of fully owned SOEs’ mandates. The SOEs themselves may provide the ownership entity with drafts of their mandates, especially when there are a large number of small SOEs. It should, however, remain the prerogative of the ownership entity to establish the final mandates and ensure that they are in line with state overall objectives.
  • Regardless of the process, the mandate clarification or formulation should include an appropriate discussion with the SOE chair and should be discussed by the SOE board to ensure a common understanding.

Drafting a statement of priorities

  • SOE mandates should also give some clear indication of how to articulate the trade-offs between commercial and policy objectives.
  • To do so, ownership entities could draft “statements of priorities”. These documents serve, for a fixed period, to clarify the SOE mandate and potential conflicts on objectives, to inform the SOE on overall government strategic priorities and to ensure their implementation at the individual SOE level. They could be instrumental in ensuring mutual understanding between the ownership entity and the SOE board on a set of high-level expectations. They should also provide the framework for the development of more specific corporate plans.

Public disclosure

  • SOE broad mandates should be publicly disclosed. They should be posted on the individual SOEs’ websites and clearly stated in their annual reports. They should also be integrated in the ownership entity’s aggregate reports, at least in a summary form, in the section reporting on large individual SOEs.
  • More specific documents such as “statements of priorities” or letters of agreement between the ownership entity and the board chair may remain undisclosed in cases involving commercially sensitive information.

Regular review

  • Mandates or broad objectives for each SOE will need to be reviewed regularly to maintain their relevance and consistency with the overall framework and economic environment. Boards and the Parliament should ensure that SOE mandates be kept relevant to the government’s policy objectives.
  • Mandate reviews could be done whenever a major change in the strategy, the market or political environment makes it necessary. Different types of mandate reviews could be done, varying in terms of depth, inclusiveness and costs:
    • Some might be done internally, i.e. by the SOE and the ownership entity with limited public input.
    • Others could be conducted by independent panels (appointed by the ownership entity) with full public input and contracted experts.
    • In some rare cases relevant Parliamentary committees might carry out the mandate reviews.
  • The choice between these different types of mandate reviews will be based on their relative advantages (in terms of depth and openness to public debate) and related costs.
  • It is nevertheless necessary to ensure that these mandate reviews happen periodically and systematically to maintain the relevance of all SOEs’ mandates, both as regards the corporation’s operating environment and the government’s policy objectives.

Consulte with stakeholders concerned

  • Mandate reviews should be carried out by the ownership entity together with high-level officials from the SOE concerned. They should also review whether the SOE is doing what it is supposed to do and whether it needs to have new or changed objectives.
  • In order to ensure that the mandate review will address all relevant issues, it is also good practice if the ownership entity engages in doing so with all stakeholders concerned, including the Parliament. Mandate reviews should be done in a transparent manner and their results reported to all concerned parties.


Source: OECD (2010). OECD, “Accountability and Transparency: A Guide for State Ownership” Corporate Governance, OECD Publishing at http://www.oecd.org/daf/ca/corporategovernanceofstate-ownedenterprises/accountabilityandtransparencyaguideforstateownership.htm (accessed 17 February 2013).

Page Created By: Matthew Seddon. 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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