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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 remuneration

The SOE Guidelines recommend that remuneration schemes for SOE boards foster the long term interest of the company and attract qualified professionals. In most countries, the remuneration of board members falls below market levels. Remuneration and incentives are often regulated and limited for both executives and board members. Some countries have policies to align pay with market rates, but not be market leading; others are considerably more restrictive. The models most commonly used are i) limiting remuneration to an attendance fee per board meeting; ii) capping directors’ remuneration at a multiple of average salaries in the SOE or the national economy; and iii) developing a fee policy taking into account factors such as the size of SOEs, time requirements and director qualifications. Attracting talent may be a challenge due to low remuneration; but other non-pecuniary benefits such as prestige, opportunities to build experience and networking attract talent to boards.

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