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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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Introduction

The importance of boards of directors is well documented in corporate governance theory and practice. Boards of directors play a fundamental role in company stewardship and performance, in determining corporate strategies and monitoring managerial performance. They are subject to duties of loyalty and care and expected to act in the best interest of all shareholders as well as, dependent on national law, the company.Some corporate legislation stipulates a board fiduciary duty solely toward the owners, whereas other extends this duty to the company as well. The OECD Principles of Corporate Governance recommends the latter approach (Principle VI.A). OECD governments, acting as owners, have increasingly looked at the role of boards with the aim of improving the governance and performance of their state-owned enterprises (SOEs), while also strengthening the State’s responsibility to exercise its ownership functions.

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