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State-Owned Enterprises: Implementation of Accountability Policies

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Practice Advice on Ethics and Accountability

State-Owned Enterprises: Implementation of Accountability Policies (OECD)

Summary Advice: The OECD reccomends that once the disclosure and transparency policy is in place, the state should make sure that it is implemented at company level.

Main Points: The following provides guidance on how to ensure effective implementation of the transparency and disclosure policy for SOEs.

Update SOEs on transparency and disclosure requirements

  • Ownership entities should support SOEs’ efforts in being up-to-date on transparency and disclosure requirements.
  • To do so, they could first provide up-to-date and complete information on their websites on legal and regulatory requirements. They could also circulate clear synthesis documents providing useful references and explaining the rationale for disclosure.
  • Specific “contact points” might be nominated in SOEs and gathered by the ownership entity on a regular basis for an update on the evolution of disclosure requirements. These meetings could also allow discussing specific difficulties in implementation, identifying areas where further guidance is needed, etc.

Support SOEs in implementation

  • Ownership entities could provide SOEs, when necessary, with focused guidance on implementation.
  • This could be done through the development of focused methodological documents, the organisation of specific seminars and trainings, etc.

Encourage best practices

  • The ownership entity may encourage SOEs to follow best practice that are not mandatory.

Underline board responsibility

  • The SOE boards’ responsibility in ensuring appropriate disclosure should be underlined. This responsibility entails overseeing disclosure of material information as well as the SOE’s communication with all shareholders.
  • The particular role of the audit committees, whenever they exist, should also be clarified. It is to reinforce boards’ competencies and underpinning their critical responsibility in this matter, but the ultimate responsibility remains with the full board.

Organise public meetings to mimic AGMs

  • For fully owned SOEs, the ownership entity could organise public meetings that would play the role of AGMs in allowing the public to challenge SOE management and boards. Such public meetings could be opened to all citizens upon prior registration.

Organise transparency awards for SOEs

  • A classical mechanism for encouraging appropriate disclosure is to organise competition and provide awards for excellence in reporting.
  • The ownership entity or other relevant institution might organise specific awards covering SOE transparency. Alternatively, the ownership entity should encourage SOEs to compete in existing and relevant awards for listed companies, such as best annual reports, etc.

Measure implementation

  • To measure effective implementation, the ownership entity could proceed in different ways:
    • Evaluate directly whether the information made publicly available by SOEs does fulfil legal and regulatory requirements.
    • Measure through specific questionnaires the extent of effective implementation by SOEs.
    • Include specific questions or measures in regular reviews of performances.
    • Ask external advisors, consultants or rating agencies to review SOE disclosure and transparency on a regular basis.
  • These measures could be completed by “subjective” evaluation of SOE transparency by market participants.
  • In any case, the evaluation will have to differentiate between mandatory and voluntary requirements.

Report on effective implementation

  • To report on effective implementation by SOEs of disclosure requirements, ownership entities could do the following:
    • Report in their annual aggregate report on how SOEs implement the most important disclosure and transparency requirements. This could include reporting on the quality and timeliness of annual reports publication.
    • Provide relevant information on their websites, with appropriate link to the SOE information.
    • Provide the Parliament with a synthesis on how SOEs implement disclosure and transparency requirements.

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 22 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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