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Boards of Directors of State-Owned Enterprises

An Overview of National Practices

image of Boards of Directors of State-Owned Enterprises

Boards of directors of state-owned enterprises (SOEs) play a fundamental role in corporate stewardship and performance. Over the last decade, OECD  governments have sought to professionalise SOE boards, ensure their independence and shield them from ad hoc political intervention. In general these approaches have worked; yet, more remains to be done to meet the aspirational standards of established by the OECD Guidelines on Corporate Governance of State-Owned Enterprises. This report seeks to shed slight on good practices drawing on national practices from over 30 economies.

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Board nomination frameworks and practices

The nomination of SOE directors is one of the primary responsibilities of the state as an active owner. According to ownership structures (centralised, widely dispersed or dual structures involving two ministries) this may remain with individual ministers or involve the entire cabinet and/or executive powers. In exercising these powers, ministers need to be mindful of the fact that they are custodians of the public interest rather than the owners of companies. The process should be rules-based and overseen by a governmental ownership function. Insofar as the ownership function has discretionary powers, it is well-advised to exercise them along similar lines and private sector good practices. This could include relying on external recruitment consultants, building databases with pools of directors and engaging the active involvement of the incumbent boards of directors. Where SOEs have private sector minority investors, processes are usually in place to safeguard the minority representation.

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