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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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The role of boards of directors

The overall directions of SOE Guidelines imply that boards play a central function in the governance of SOEs. The board carries ultimate responsibility, including through its fiduciary duty, for SOE performance. In this capacity it acts essentially as an intermediary between the state as a shareholder, and the company and its executive management. This three-layered approach, which is consistent with general company laws of most countries, has been implemented by a number of governments to good effect. SOE boards shifted from their historic role as oversight bodies, entrusted with ensuring compliance toward driving performance, to setting strategies and co-operating with management towards their implementation. However, in a minority of countries, SOE boards are not adequately empowered by their governments to assume such a strategic role, circumvented for instance by direct ministerial appointments of corporate executive management and/or informal channels of communication and instructions. This may detract from the value-adding of boards.

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