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State-Owned Enterprises: Reporting on Performance

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Practice Advice in Evaluation and Performance Measurement

State-Owned Enterprises: Reporting on Performance (OECD)

Summary Advice: The OECD reccomends reporting on performance, covering the publication of aggregate reports by the ownership entity, web-based communication and reporting to Parliament.

Main Points:

Main steps that might be followed in developing an aggregate report

Clarify key messages, main content and structure

  • A preliminary step is for the ownership entity to clarify the key messages it wishes to communicate, to whom and why. This could be subject to internal discussion and an opportunity for the ownership entity to reflect on its role and missions.
  • The main message could, for example, highlight an important new development in the ownership policy of the state. It could also explain significant evolution in SOE performance. Another option is for the ownership entity to emphasise a particular theme or set of priorities.
  • As an input in developing this key message, it might be useful to consider how to respond to the questions most frequently asked by visitors, the media or other interested parties. It could also keep in mind the typical misunderstandings about how the state carries out its ownership function. Aggregate reports should allow clarifying most of these misunderstandings.
  • An important and useful step is to agree within the ownership entity on the main content and structure of the report. This includes agreeing on the main analysis on financial performance and specific focus which will be covered, if any.
  • This step usually triggers a lot of internal discussion within the ownership entity. This should not be reduced, as it is per se one important benefit from developing such reports.

Collect relevant information

  • A central stage in developing aggregate reports is collecting information both within the ownership entity and from the SOEs themselves.
  • In order to do so, ownership entities could put in place systematic information collection processes with accompanying guidance, covering the ownership entity different officers and/or board members as well as the SOEs themselves.
    • Specific data sheets could be sent to companies for them to fill out with their updated figures.
    • Specific working groups with representatives of all the SOEs covered in the report could also be formed.
    • Another option is to identify or use “contact points” in each SOE. Thesecontact points might work in close relation with the officer in charge ofthe SOE within the ownership entity, not only to provide the necessary information to develop the aggregate report, but also as a means more generally to strengthen their relationship;
    • Finally, ownership entities could also use external consultants to  ensure data consolidation on the whole state portfolio.
  • This information collection stage is not only central, but allows involving SOEs early in the process. This active involvement is necessary and important.
  • The information asked from SOEs to develop aggregate reports would in most cases be also necessary to actively and strategically oversee SOEs. Developing aggregate reports might thus in some cases be instrumental in systematizing reporting.

Review of company data by the SOEs

  • Information on specific SOEs should always be approved or reviewed by the companies themselves.
  • This could be done formally or informally, through the officer in charge of the SOE within the ownership entity. In some cases, company information could even be directly written by the companies. The aggregate report will have an impact on their image and value. Listed companies, for example, might indeed be particularly careful with market-sensitive information.
  • However, the report should still reflect the views of the ownership entity as the owner.

Co-ordinate with other government departments

  • Developing aggregate reports also entails discussing and agreeing on a number of points with other government departments. This will be the case especially whenever the ownership function is not fully centralised.
  • This co-ordination might be politically difficult and give rise to rivalries, conflicts of interest or turf battles. It might indeed become the most difficult and time-consuming step of developing aggregate reports.
  • This step should thus not be underestimated, particularly in planning for the development of such reports.

Draft main elements and agree on a final draft

  • Based on collected information, internal discussions and external coordination, the team in charge could draft the synthesis and comment on the overall performance. It will also complete the different sections in light of most recent data and events.
  • The final draft of the aggregate report should be agreed on both by senior officers of the ownership entity and by the ones in charge of the relationship with the companies covered.

Endorsement by the relevant authority

  • In developing and publishing aggregate reports, ownership entities may have them endorsed by a relevant authority, highlighting the main elements or priorities of the state ownership policy.
  • The presence of a foreword or other statement signed by the main ministry in charge of state ownership might give more visibility, political weight and thus appropriate status to this key communication tool.
  • These forewords set the tone and provide a good indication of the current policy on state ownership. They can highlight, for example, the importance of state ownership for the concerned economies and clarify the objectives of such ownership for the current government.

Active use of aggregate reports as a main communication tool

  • Ownership entities could make active use of aggregate reports in many different ways.
  • Internally, aggregate reports might serve the role of updated reference documents. Once consensus on practices has been reached and formalised in the aggregate reports, these can be used as a helpful reference for discussion with other departments, the SOEs themselves and relevant political authorities.
  • Externally, aggregate reports might be actively used as a main communication device by the ownership entity and its officials in communicating with the media and external visitors. Aggregate reports can also be useful documents to explain the state’s practices regarding ownership in international fora.

Use of the media to improve transparency

  • The ownership entities should encourage active media coverage of state sector performance. The press, by raising difficult questions, can play a critical role and contribute to accountability.
  • The ownership entities should thus be pro-active in providing relevant information to the media. They could use the aggregate report as a main device in informing and communicating with the media.

Web-based Communication

Decide on the main structure

  • Discuss internally which should be the main elements of the website and its architecture (main paths, etc.).
  • To do so, it is important to think about the main messages that the ownership entity wishes to communicate to the general public regarding its activity, its organisation, its performance, etc. It could also be useful to get inspiration from other existing websites and figure out the typical questions that will be asked by external visitors.

Collect relevant information

  • All relevant information regarding the ownership entity objectives, organisation, constituting documents, the size and composition of the state sector, governance principles, etc., should be collected.
  • Short summaries of most important documents should also be provided with links to the full document.

Draft main pages

  • Main pages are strategic in terms of image. Their drafting is important. Management should agree on them and review them on a regular basis.
  • The web manager has an overall responsibility of ensuring coherence and consistency in terms of style, length, etc., but the responsibilities for drafting different pages should be allocated to relevant officers.

Design a simple website and enrich the page architecture progressively

  • It is preferable for the website to be built step by step, keeping it simple at the beginning and enriching it progressively.
  • Keeping it simple, using ready-made script and easy-to-customise templates will minimise the resources required. It should be simple in terms of animation, as visitors want to get what they want fast, while sophisticated animation usually takes time to be loaded.

Test the website

  • It is important to test the website by browsing though it as a typical visitor. The objective it that the most valuable or targeted visitors will find access easily to the information they are looking for. Give a clear guide and site’s path to what visitors want.
  • Getting regular feedback on the quality and usefulness of the website might be useful to improve it.

Put in place updating processes

  • Websites are valuable as long as they are updated regularly. It is thus important to designate internal responsibilities for updating the different pages in terms of content and develop internal routines to alert the relevant persons on the need to update their pages.
  • A clear process for feeding the “what’s new” or “news” section has also to be developed.

Reporting to Parliment

Developing broad guidelines for dealing with MPs

  • The ownership entities should clarify the process for reporting to parliaments and provide guidance to all relevant entities for doing so. This guidelines could encourage SOE officials to be open and direct in dealings with parliamentarians, to familiarise themselves with parliamentary functioning and even to take specific training in this regard if necessary.

Collection of reports from SOEs

  • Audited annual financial statements of individual SOEs should be sent to or collected by the ministries and/or ownership entities.

Transmission to Parliament

  • SOEs’ annual financial statements might have to be reviewed by the ownership entity or branch ministry and transmitted to the Parliament, according to relevant laws. Annual financial statements are often used to generate budget supplements as background to budget acts, and may be aggregated into a combined or summary report on the SOE sector by an ownership entity.
  • The ownership entity and other ministries’ involvement in transmitting SOE information to the Parliament might be relatively light, or very intensive, implying extensive evaluation, analysis and dialogue with SOEs. A right balance has to be found to adjust to parliamentary needs and ensure adequate accountability.
  • As both line ministries and ownership entities might be involved in reviewing and transmitting documents to Parliament, active cooperation and co-ordination is necessary to ensure a free flow of information.

Developing specific, more in-depth but concise performance documents

  • When reports to the Parliaments are in the form of annexes to the budget, they tend to be strongly summarised and focus on the fiscal impact of SOE operations, not providing enough information on SOE performance.
  • Ownership entities (be they centralised or sector branch ministries) should develop specific yet concise documents describing SOE performance to allow a focused discussion by parliamentarians on how the state is performing its ownership rights.
  • If performance reports are detailed with extensive evaluation and analysis, summaries should be provided to ensure effective reading and coverage by parliamentarians.

Providing some form of aggregated data

  • In the same vein, some form of consolidation or aggregation of financial and performance data should be provided to the Parliament to allow relevant discussion on the overall state portfolio performance.

Report on timing of reporting

  • When individual SOEs’ financial statements are tabled in Parliament, this usually has to be done within a specific time frame. In this case, the ownership entities should report on how effectively the time limits have been respected, both by the SOEs themselves and by the ministries/ownership entities in charge of transmitting the information. This could avoid transmission to be drawn out simply because of co-ordination difficulties and the multiple steps involved.

Encouraging discussion in committees

  • Use should be made of specialised committees of Parliament (often finance or budget committee). Specialised committees allow for more in-depth and technical discussion on SOE performance because of their expertise and smaller size. They fulfil the important function of preparing and flagging key issues for plenary debates.

Focusing full assembly discussion

  • Depending on parliamentary tradition as well as the importance of a particular SOE, reports may be discussed in the full assembly. This could be (and is often) done in the context of approval of the budget act.
  • A specific and separate discussion on the performance of SOEs could be organised to focus the discussion on important aspects of state ownership other than only its impact on the state budget.

Allowing timely performance discussion

  • A special discussion on SOE performance could also be organised based on incomplete (and unaudited) data late in the current fiscal year. This would allow more timely discussion on recent performance.
  • This communication on current year’s performance should, however, be handled very carefully, especially regarding listed SOEs. It should not interfere with the SOEs’ own communication.

Developing long-term performance reporting

  • Ownership entities could also develop some form of long-term performance reporting, covering between four and five years.
  • Long-term performance reporting allows for a periodic analysis of the effectiveness of state ownership and a discussion and review of specific SOEs’ mandates. It is also well suited for consideration of whether or not SOEs are better kept within the state portfolio or whether other means of achieving the policy goals are more appropriate.
  • Specific rules could be adopted to ensure that each SOE will be discussed or reviewed this way by the Parliament at least every 5 years.

Get ready for efficient ad hoc reporting

  • The ownership entities and/or branch ministries should be prepared to answer questions covering a large range of issues, including answering orally to committee hearings.
  • Some typical events or public issues will tend to provoke specific questions. The ownership entity can anticipate them to some extent, even if, by definition, ad hoc reporting is difficult to structure in a systematic way. The ownership entity should pay attention to parliamentary schedules and even gather elements to answer typical and/or anticipated questions in a systematic fashion.
  • The time requested from SOE senior officials to testify or answer questions from parliamentarians should be limited. It is also important to avoid that ad hoc reporting leads to excessive interference either in the ownership entity mandate or in the SOE management. Mechanisms have to be developed to limit excessive politicisation and instrumentalisation of these debates for other political purposes

Developing safeguards to deal with confidentiality issues

  • Specific procedures should also be developed to deal with confidentiality issues, particularly when the SOEs concerned are in competitive sectors. Reporting to Parliament, especially ad hoc reporting and specific hearings, should not put these SOEs in a difficult situation, forcing them to disclose commercially sensitive information.
  • These procedures could include requirement that the committee receives the information as private or secret evidence and that the meeting be kept confidential or closed. These procedures could be put in place whenever this is requested by the SOE on legitimate grounds.

Limit the cases where ex ante approval is requested

  • The cases where the ownership entities would have to get ex ante approval from the Parliament should be limited to significant decisions both politically and in terms of financial consequences. This will avoid undue political interference in the exercise of ownership rights as well as in the SOE operations.

Make parliamentary reports publicly available

  • Reports to the Parliament as well as minutes of discussion within the Parliament should be made available to the general public, such as though the Parliament and the ownership entities’ websites.
  • This public disclosure allows a series of other actors inside or outside the government and the Parliament to have access to information and scrutinise the exercise of state ownership.

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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