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State-Owned Enterprises: Developing an Ownership Policy

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Practice Advice on Strategy and Structure

State-Owned Enterprises: Developing an Ownership Policy (OECD)

Summary Advice: The OECD reccomends that the government define its overall objectives and ownership practices. An effective way of doing this is by developing an ownership policy, as recommended in the Guidelines (Guideline II.A): “The government should develop and issue an ownership policy that defines the overall objectives of state ownership, the state’s role in the corporate governance of SOEs, and how it will implement its ownership policy.

Main Points: The ownership policy should be a short but high-level policy document providing a clear statement of the state’s overall objectives as an owner and summarizing the most important elements of all other documents related to the state’s overall objectives and strategy vis-à-vis SOEs. The following are the main steps in developing an ownership policy.

Survey existing documents

  • In order to develop an ownership policy, the ownership entity could first survey existing documents, including legal or regulatory texts, official declarations, internal policies, codes, etc., related to the exercise of ownership rights.
  • The ownership entity should also review the effective implementation of these provisions.

Receive directions from the government

  • The ownership entity could also receive directions from the government on the ownership objectives. This is particularly the case where there is a change in government or a change in overall governmental policy

Develop a draft document

  • Based on instructions received from the government and existing relevant documents, the ownership entity could develop a draft document for discussion, summarizing the main elements of existing policies or practices and identifying potential main elements to be included in the ownership policy.
  • This draft document should also allow identification of areas where there are some contradictions among existing documents, or where there is a need for clarification in terms of specific objectives.

Consultation with all concerned parties

  • The ownership entity should consult with all concerned government entities and discuss actively the main elements of the ownership policy.
  • This could be done, for example, through a specific Working Group comprising representatives from the ownership entity, the relevant Parliamentary committees, other concerned ministries, the state audit institution, relevant regulators, etc.
  • The objective is to ensure broad understanding and support by all concerned entities on general objectives and practices of the state as an owner, and thus on the functions and responsibilities of the ownership entity.

Consult broadly and early

  • It could be fruitful to consult even more broadly with selected board members and management of SOEs, and even to integrate them into the Working Group.
  • In the same vein, representatives from the private sector, including investors and market service providers, as well as representatives from the trade unions could be included early in the consultation process. This would increase the level of acceptance of this ownership policy by key stakeholders and market participants.
  • More generally, making appropriate use of public consultation will be instrumental in testing the market and political reaction.

Obtain and demonstrate high-level political approval

  • If the ownership policy was not initiated at the political level, it is important, as it is further developed, to get and demonstrate highlevel political approval. This is especially the case when no clear instructions from the government had been received prior to the development of the draft ownership policy.
  • Clear and high-level political approval will reinforce the credibility of state ownership policy and position the state as a predictable owner.
  • This high-level political approval could be provided through an introduction or foreword signed by the minister in charge of state ownership or the prime minister. Another way is to organise a highlevel political event to “launch” the ownership policy with the participation of appropriate ministers, inviting all relevant stakeholders including market participants and ensuring adequate press coverage.

Endorsement by relevant public servants

  • To make the ownership policy even more credible, it could also be endorsed by relevant public servants, particularly the ones working for the ownership entity.
  • Official endorsement by civil servants will strengthen the state’s credibility in “walking the talk”, thus in implementing effectively its announced policy.

Public disclosure

  • Another key aspect of the ownership policy is its public disclosure. “The ownership policy and associated company objectives should be public documents accessible to the general public and widely circulated amongst the relevant ministries, agencies, SOE boards, management and the legislature” (Guidelines Annotations, p. 24).
  • To ensure large public disclosure, the ownership policy could be:
    • Launched in a high-level public event largely covered by the media.
    • Posted on the ownership entity website.
    • Included in the Aggregate Annual Reports, at least for its most important elements.
    • And printed copies could be sent to all relevant government organs, SOE boards and management as well as market participants.

Adapt if needed, keeping core elements stable

  • SOEs face continuing changes in their economic, market and in some cases political environment. The state as an owner will thus need to adapt its ownership policy on a regular basis.
  • However, the main elements should be as stable as possible and not subject to frequent changes. The objective is to give a clear picture of the behaviour of the state as an owner, and one important aspect of this is to bolster the perception that it is a predictable owner. Consequently, “the state should strive to be consistent in its ownership policy and avoid modifying the overall objectives too often” (Annotation, p. 23).

Source: OECD (2010). OECD, “Accountability and Transparency: A Guide for State Ownership” Corporate Governance, OECD Publishing at (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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School of Public Policy and Governance