copy the linklink copied!6. Disclosure and transparency

a) Overall disclosure and reporting obligations placed on individual SOEs

In Argentina, the Law on Access to Public Information (Ley de Derecho de Acceso a la Información Pública), which considers “all government-held information” to be public, was approved by the Congress in 2016 and entered into force in 2017. The new Law replaces the Decree 1172/2003, which had only disclosed information on the executive branch to the public. Apart from this law, there is not yet a comprehensive national SOE disclosure policy in Argentina. It is expected that the Law will result in developing a portal, which shall contain the relevant information of all the SOEs to facilitate the public access to the information.

In Brazil, the enactment of the State Responsibility Law (Law 13303) in 2016 brought new requirements for transparency to state-owned companies. The requirements are:

1. I. Preparation of an annual letter signed by the members of the Board of Directors, explaining the public policy objectives of the public company, the joint stock company and its subsidiaries, in order to meet the collective interest or the imperative of national security that justified the authorisation for their respective creations, with a clear definition of the resources to be used for this purpose, as well as the economic and financial impacts of the achievement of these objectives, measurable through objective indicators;

2. II. Adequacy of its social status to the legislative authorisation of its creation;

3. III. Timely and up-to-date disclosure of material information, particularly those related to activities carried out, control structure, risk factors, economic-financial data, management comments on performance, corporate governance policies and practices, and description of the composition and management remuneration;

4. IV. Preparation and dissemination of information disclosure policy, in accordance with current legislation and best practices;

5. V. Preparation of a dividend distribution policy, in the light of the public interest that justified the creation of a public company or a mixed-capital company;

6. VI. Disclosure, in an explanatory note to the financial statements, of the operational and financial data of the activities related to the achievement of purposes of collective interest or national security;

7. VII. Elaboration and disclosure of the policy of transactions with related parties, in accordance with the requirements of competitiveness, compliance, transparency, fairness and commutativity, which shall be reviewed at least annually and approved by the Board of Directors;

8. VIII. Broad dissemination to the general public of an annual corporate governance letter, consolidating in a single written document, in clear and direct language, the information referred to in item III;

9. IX. Annual disclosure of integrated or sustainability report.

In the Czech Republic, all joint-stock companies including SOEs are required to have their own website and publish key information on corporate governance according to the 2014 Act on Business Corporations. For example, a proposal of new members of the board of directors and of the supervisory board in the “dualistic” model and a proposal on new members of the management board in the “monistic” model of corporate governance must be published on an SOE’s website.

In Chile, in line with an additional chapter to the Corporations Act (Law No. 18,046) in 2014 on related party transactions for companies including SOEs, boards members of all SOEs governed by the main ownership entity Public Enterprises System (Sistema de Empresas Públicas, SEP) should declare any transaction with related parties annually to the Shareholders meeting or to the SEP.

In Costa Rica, since 2015 all financial SOEs have produced financial reports under the supervisory accounting standards that were developed based on a 2011 version of the International Financial Reporting Standard (IFRS). Conversely, non-financial SOEs have experienced delays in implementing IFRS and, in some cases, have not published audited annual financial reports. Consistent with recommendations made by the OECD Working Party on State Ownership and Privatisation Practices during the course of the OECD accession process, an executive decree was issued in February 2018, providing non-financial SOEs with a 1 January 2020 deadline to fully comply with the IFRS. Both the Ministry of Finance and the PAU have indicated an intent to follow up and promote full implementation of IFRS, as well as publication of audited financial statements by all SOEs, as soon as possible.

In Estonia, since 2017 the quarterly reports are required to be supplemented by comments/overview of the activities and important events have to be disclosed also the website for larger SOEs. The updated also added a requirement to disclose the annual remuneration of every management and supervisory board member individually. The Nomination Committee makes proposals to shareholding ministers based on competences and experience leading the proposal to elect a candidate to the supervisory board. The proposals are confidential until the election/nomination process is finalised.

In Finland, all non-listed SOEs are required to report on their financial results with the comments by their management every quarter of the year to the Ownership Steering Department at the Prime Minister´s Office. Remuneration policy and pay-out ratios are required to be reported and disclosed at the AGM and on the Internet websites of SOEs.

In Germany, in accordance with the CSR Directive Implementation Act, passed by the Bundestag on 9 March 2017 and based on the Directive 2014/95/EU (Sect. 289b ff. German Commercial Code), certain stock corporations, comparable limited-liability registered partnerships and cooperatives are required to publish a non-financial declaration or report. The Act does not distinguish between SOEs and privately-held enterprises.

The CSR Directive Implementation Act requires the disclosure of information on non-financial issues, at least on environmental, labour and social affairs, the upholding of human rights and the prevention of corruption and bribery (Sect. 289c HGB). For the individual non-financial components, those disclosures are to be made when they are necessary for gaining an understanding of the course of business, the business result and position of the company as well as of the effects of its operations on the non-financial components. In addition to the information on non-financial disclosures, for companies or corporations subject to the reporting obligation, the business model must also be described if the company is subject to the reporting obligation and has not implemented a specific policy with respect to individual aspects of sustainability. Instead of a presentation of the policy and its results, the company must provide an explanation for this (“comply or explain” as per Sect. 289c Para. 4 HGB). Furthermore, the company may omit information from the disclosure of which it deems to be to its own detriment, provided the requirements of Sect. 289e HGB are met.

In Iceland, the Ministry of Finance and Economic Affairs has been formulating a new database for all SOEs to facilitate disclosure of both financial and non-financial information of SOEs. All SOEs will be required to submit defined information from annual reports and other operational information to the Ministry database. Additionally, the Ministry will be required to hold an annual meeting with all SOEs to review the above aspects as well as main objectives and long-term plans. The Ministry intends to introduce the first phase of such a database before the end of 2019.

Israel has improved SOE disclosure and reporting practices with respect to enterprise financial and operating results and board selection processes. In accordance with government decisions, the GCA accompanies debt issuance and privatisation processes in governmental companies. Also the GCA publishes various criteria for screening and sorting candidates prior to selection of board members. At the end of the process, a database of potential board members is created, from which board members are elected to serve the positions.

In Italy, Article 22 of the Legislative Decree 33/2013, which is related to "the requirements of publicity, transparency and diffusion of information from the Public Administrations", requires the Public Administrations (as defined in art. 1 of the Legislative Decree 165/2001) to update the yearly set of information given—for their participated enterprises—on every member of the board of directors/auditors, with special focus on the economic remunerations agreed. Information is usually reported in the form of the financial statements of the companies and is always shown on dedicated sections of the SOE websites, as well as for the public ownership entities.

In Japan, below are the changes of disclosure requirements that have been applied to all listed companies, including listed SOEs.

• Starting April 2017, information on business policy is added to annual securities reports;

• Starting April 2018, more comprehensive information on management discussion & analysis of financial condition, results of operations and cash flows (MD &A) is provided through annual securities reports;

• Starting April 2015, mandatory disclosure of information on the numbers of male and female officers, and the percentage of female officers are provided through annual securities reports.

In Korea, as part of efforts to address the gender pay gap in the SOE sector, a change was made by an amendment to the “Act on the Management of Public Institutions” on 31 December 2018 to require all SOEs and public institutions to disclose status of the wage difference between male and female executives/employees. With respect to board qualifications and selection processes, a new clause was added to the Act in 2016 to make meeting minutes of the Committee for recommending SOE CEOs publicly available for inspection by the public unless the case is judged to be exceptional according to the Official Information Disclosure Act. Also, the Committee is mandated to disclose eligibility criteria for CEOs taking into account specialities and requirements of the corresponding corporation or institution. Another Article was newly added to the Act in 2018 to require the Minister of Economy and Finance or the minister of the competent agency to subject an executive of an SOE or public institution to an aggravated punishment and public scrutiny through resolution by the Steering Committee if she/he is found guilty in connection with employment fraud or employment irregularities.

In Latvia, there have been substantial policy changes regarding disclosure and transparency of information on SOEs. Firstly, a Law on Governance of Shares was adopted on 16 October 2014 due which expired, then followed the Law on State and Local Government Capital Shares and Capital Companies ( Law on State Shares) and several Cabinet Regulations on 1 January 2015. The Law on State Shares and related Cabinet Regulations, except the regulation regarding sales of the state and local government shares, which required publishing information about the auction in the official newspaper, had no particular sections on disclosure and transparency of information. The newly adopted Law on Governance of Shares has specific sections for disclosure of information. They include Chapter V. Management of State Capital Shares, Section 29. Provision of Disclosure of Information, Chapter VI. Governance of Capital Shares of a Derived Public Person and Section 36. Provision of Disclosure of Information.

Previous practices on the disclosure of information were the same as for private enterprises– preparing the annual report according to the Annual Accounts Law adopted on 14 October 1992 and entered into force on 1 January 1993 and the Consolidated Annual Accounts Law adopted on 30 September 1999 (a new Law On Consolidated Annual Accounts was adopted on 19 October 2006 and entered into force on 22 November 2006). They were later united into one Law On the Annual Financial Statements and Consolidated Financial Statements (Law on Statements) adopted on 16 October 2014 and entered into force on 1 January 2015. In some cases the annual reports were published, in some not. Every annual report was and still is available on Lursoft. The register of companies’ annual reports is available upon paid request if the annual report was submitted to the Enterprise Register of the Republic of Latvia and after the adoption of Law on Statements if it was submitted to State Revenue Service, which then electronically transferred it to Enterprise Register.

The new Law on Governance of Shares requires the Cross-Sectoral Coordination Centre (CSCC) as a coordination institution to provide free access to financial information about SOEs, draw up unified guidelines, establish an interactive website and list and calculate average financial results of SOEs grouped by different criteria. Shareholders are also required to publish information about the State ownership of shares; the general strategic objective of SOEs; the conformity of State ownership with the conditions of Section 4., Conditions for Participation of a Public Person; and SOE’s ownership in other enterprises. They are also required to publish on their conformity with conditions of Section 4, information regarding termination of the ownership; reorganisation or transformation of SOE; approved annual accounts; information about dividends and payments made into the state budget; and information about the shareholder representative of the State. Information about funding received from the budget and donations made and received is published as well.

In practice, all information required to be published is available on websites of the shareholders, eleven line ministries, the Privatization Agency and the National Electronic Mass Media Council. CSCC also oversees if such information is published and requires shareholders and the SOE to supplement information if any is missing. CSCC also manages two websites: www.pkc.gov.lv and www.valstskapitals.lv, which provide the information required by the Law on Governance of Shares. The website www.valstskapitals.lv focuses especially on disclosing information about all SOEs in an interactive database and provides information about the related legal acts and guidelines. The website www.pkc.gov.lv first was first published in 2012 and since then has provided different information regarding SOEs and corporate governance. The website www.valstskapitals.lv was first published on 2016. An important part of the information disclosure is publishing of the Public Annual Aggregated Report on the State-Owned Enterprises and Shares, which was launched in 2015 about all results of SOEs in 2014.

In Norway, in the 2014 white paper on ownership policy, the government expressed an expectation (which is not considered a disclosure requirement as such) that wholly-owned state enterprises with commercial objectives that are not defined as “small enterprises” as per Section 1– 6 of the Norwegian Accounting Act should strive to be as transparent as listed companies unless special circumstances dictate otherwise.

In Sweden, the reporting guidelines (included in the state ownership policy) originally adopted in 2007 were revised in 2016 in order to comply with changes in legislation etc. However, no material changes were made.

In Switzerland, starting in early 2019, vested interests of board members of SOEs (interest ties) are published in a public database by the Federal Chancellery SOEs’ state-decreed strategic objectives also include a standard objective to establish an adequate risk management system in accordance with international risk-management standards, such as ISO 31000.

In the United Kingdom, in 2016, the Cabinet Office introduced a requirement that certain categories of government owned assets and entities, including some SOEs, would be required to undergo a “Tailored Review”. This is a structured review process which investigates the activities of the body and, confirms: (i) its structure ; (ii) that its governance arrangements remain appropriate; and (iii) that it is efficient and effective in its delivery. The expectation is that all Tailored Review reports will be published. In 2016, the Cabinet Office introduced a new Governance Code for Public Appointments in response to an independent review of the appointments process. This guidance applies to board appointments for some (but not all) SOEs. The basic principle underpinning the guidance is that the position is subject to open competition and that the process is fair and transparent.

b) Changes to the rules and practices bearing on external auditing of SOE financial statements and changes in the roles assigned to independent auditors and the state audit/control functions

In Brazil, under the Law 13,303/2018 and the Decree 8,945/2018, all state-owned companies are obliged to contract independent auditing.

In the Czech Republic, an amendment to the Act on Auditors (No. 299/2016 Coll. of Laws of the Czech Republic) came into effect on 1 October 2016. The amendment has led to an increase in the role of the audit committee for SOEs. Public interest entities and state-owned entities are now required to establish an audit committee. The audit committee should comprise no fewer than three members, the majority of which should be independent.

In Italy, Art. 17 of Legislative Decree 39/2010 applies to listed companies and to those with listed financial instruments issued, affirming that the statutory audit mandate must be a nine-year term for the auditing firm and a seven-year term for statutory auditors. The following compulsory leaving period, as amended by art. 18 of Legislative Decree 135/2016, lasts four years (previously, it was 3 years) since the expiration date of the previous engagement and the auditor or the manager in charge of the auditing firm is not allowed to be appointed subsequently as director or as statutory auditor of the company, for a three-year period at least (previously 2 years).

In Latvia, there have been no change to the rules and practices bearing on external auditing of SOE financial statements, except for adoption of EC Regulation No. 537/2014, which states that for a public interest entity (an entity with transferrable securities) the maximum term for the same audit firm is 10 years. The state audit entity is performing state audits on SOEs and publishing their public reports on their website on a regular basis according to the State Audit Office Law. There were no policy changes to the Law since 2011. The latest reports in 2018 are on the sport related SOE Tennis centre “Lielupe” and culture related SOEs.

In Poland, the most important legal act regulating this subject is The Act on Auditors, Audit Firms and Public Supervision of 11 May 2017. New definitions of terms appeared in the Act, such as an auditing company and a key auditor. The new act includes guidelines for selecting and cooperating with an audit firm examining the company's annual financial statements with the participation of the Treasury prepared by Chancellery of a Prime Minister, which are:

• Actions taken by the supervisory board or the representative of a main shareholder before the selection of the audit firm;

• Basic elements of the announcement—invitation to tender for the audit of the financial statements of the company;

• Activities of the supervisory board or the representative of a main shareholder after submitting the offers;

• Issues of selecting an audit firm in a group of companies;

• Material elements of the contract for the audit of the financial statements;

• Terms of cooperation with the audit firm and the key auditor.

In Japan, the changes of rules on external auditing that are applied to all listed companies, including listed SOEs are the following:

• Regarding external auditing of the financial statements of listed companies, the auditing procedures for addressing the risks of material misstatements due to fraud were clarified in 2014, and it was decided that if the risks are above a prescribed level;

• The Standard to Address Risks of Fraud in an Audit would be applied to ensure greater care in implementing auditing procedures (Article 3, paragraph (3), item (v) and Article 5, paragraph (4), item (i) of the Cabinet Office Ordinance on Audit Certification of Financial Statements);

• The auditor must clarify the key audit matters that are deemed to be of particular importance in the fiscal year, in the audit report starting from 2021 (early application possible from 2020. Article 4, paragraph (1), item (i)(c), paragraph (2), item (i)(2), and Article 9).

c) Changes in aggregate annual reporting by the state about its SOE portfolio

In 2018, the Brazilian government created the Panorama of State-Owned Enterprises, an interactive tool which presents general data on federal state enterprises such as the total amount of SOEs, data on direct or indirect control of the Federal Government, dependence on the National Treasury, economic-financial analysis and staff profile. It is updated daily and allows for visualisation of the data from different perspectives such as vision by company, by business groups, by sectors of activity and by a group of all the companies.

In the course of its accession process Costa Rica has developed aggregate reporting on SOEs. Its first annual report compared favourably to similar efforts by ownership entities in many OECD countries. It contains summary descriptions of SOEs, their missions and basic financial performance indicators for both 2017 and 2018, accompanied by some discussion and analysis. To support preparation of the aggregate report, the Ministry of the Presidency issued Directive 102-MP, General Policy on Transparency and Disclosure of Financial and Non-Financial Information for SOEs, their Subsidiaries and Autonomous Institutions in April of 2018. The directive is wide-ranging in scope and establishes a disclosure policy for both financial and non-financial information on SOEs. The first aggregate report demonstrates that SOEs still have significant gaps to address to fully implement the Directive’s requirements for financial and non-financial reporting.

As for France the financial report of the State shareholder can be consulted at the website of the Government Shareholding Agency (APE). The scope of the combined financial statements for 2017 corresponds to the most significant entities in the appendix to Decree No. 2004-963 of 9 September 2004 on the creation of the State-owned service of the State Investment Agency, modified by the decree n ° 2013-946 of October 22nd, 2013, as well as any change (withdrawal or addition) intervened since. The development of combined accounts requires the application by all the combined entities of a body of homogeneous standards. The scope of consolidation includes entities presenting French regulatory accounts and other entities presenting IFRS accounts. Taking into account the significant weight of the entities presenting IFRS accounts, it was opted in the continuity of the previous years for a presentation of the combined data of the report State shareholder under IFRS.

A new tool has been used since fiscal year 2017 to allow better reporting of entity information and to facilitate aggregation of data. The implementation of this tool led to the recasting of some presented states. As an exception, in fiscal year 2017, the cash flow statement does not include a comparative report for the previous year.

In Iceland, Article 54 of the Public Finance Act No. 123/2015 defines the preparation and submission of annual financial statements for SOEs. The SOEs shall submit their annual financial statements to the Authority, the minister concerned and the National Audit Office no later than 31 March each year. Article 56 (Act No. 123/2015) provides for the preparation of the government accounts. Within six months of the end of the year, the Minister of Finance and Economic Affairs shall publish the government accounts covering the finances of groups of SOEs belonging to the central government. The government accounts shall include summery information on the finances of central government entities and key figures from the annual financial statements of central government entities. Concurrently with each publication of the government accounts, the Financial Management Authority shall make public the annual financial statements of individual SOEs.

In Latvia, there have been changes in aggregate annual reporting by the state about its SOE portfolio. Firstly, a new Law On Governance of Shares and Enterprises owned by Public Entities (Law on Governance of Shares) was adopted on 16 October 2014 which expired and was replaced by the Law on State and Local Government Capital Shares and Capital Companies (Law on State Shares) and several Cabinet Regulations on 1 January 2015. The Law on State Shares had no rules on publishing any annual reports by the state about its SOE portfolio. The new Law on Governance of Shares has a particular section on publishing the annual public report in Section 30. of the Annual Public Report. According to the law, the Cross-Sectoral Coordination Centre (CSCC) as a coordination institution has to prepare and submit the annual public report on capital companies and capital shares belonging to the State in the previous year to the Cabinet of Ministers and the Saeima (Parliament) . This procedure was started in 2015 about all results of SOEs in 2014.

The report has to include information regarding State participation in capital companies, resources invested by the State and return on equity/assets, the services provided by capital companies, information regarding sectors in which SOEs operate, as well as other information necessary in order to provide an insight in SOEs and capital shares. The report includes information about the governance of SOEs, development of strategies, nomination commissions and nomination processes, work on normative acts, work of supervisory councils in the SOEs, cooperation with OECD, training, consulting for SOEs and holders of shares, future development of SOEs Governance, methodology used in the report and performance of State-Owned Enterprises. The performance information includes information about aggregate assets, equity, turnover, dividends, contributions (taxes and dividends) paid to the State, budget financing received, donations received and made, profits, return on equity and assets, number of employees and average remuneration, changes in SOEs, state-owned equity shares, equity shares belonging to the SOEs and capital shares in the enterprises effectively controlled by the State and capital companies that currently are not carrying out economic activities and are insolvent.

The individual information about each SOE includes information about its general strategic goal, the most important events in the year to be reported and also the most important planned events in the following year, main financial and non-financial goals, achievements, governance structure (which was added recently and includes information about the State shareholder, members of the board and the council and main financial indicators). The main financial indicators include: turnover, profit/loss, EBITDA, assets, share capital, equity, investment in fixed assets, dividends paid to the state budget, contributions made to the state and municipal budget, donations received and made, funding received from the state budget, profitability (profit/turnover) in %, ROA (profit/assets) in %, ROE (profit/equity) in %, total liquidity (current assets/short term liabilities), D/E (liabilities/equity), number of employees and average gross remuneration per employees per year in thousands EUR and recently added information—gender representation in management (female/male), annual report in accordance with IFRS (yes or no).

The main financial indicators are published for two consecutive years. The report is prepared and submitted in print form to the Cabinet of Ministers, the Saeima (Parliament), ministries, the Privatization agency and the National Electronic Mass Media Council and Cities’ Association. An electronic version is made available for a public download on the websites www.pkc.gov.lv and www.valstskapitals.lv both in Latvian and English languages.

In the Slovak Republic, according to the Constitutional Law of Budgetary Responsibility (Constitutional Act no. 493/2011), since 2013 the Ministry of Finance is obliged to prepare and publish the Annual Report. The Report should be approved by both the government and national parliament. It includes the consolidated financial statements of the public sector, some details on major SOEs (analysis of annual change in profits and shareholder’s equity) and annex with the list of all 92 SOEs at central government level. The list includes information on the percentage of state ownership, which sectoral ministry exercises the ownership rights in each SOE and data for last 3 years on value of equity and value of net profit or loss.

In Sweden, since 2016, the SOEs may choose for the sustainability report to be either a separate report or an integrated part of the annual report. However, the requirement for the sustainability report to be quality assured through independent review and assurance by the SOE’s statutory auditor remains.

In the United Kingdom, where there is no centralised aggregate reporting of the performance of SOEs, since 2017 Government departments have been required to publish an Accounting Officer Systems Statement. This is a single statement setting out all of the accountability relationships and processes within a government department, making clear who is accountable for what, from the most senior departmental official (the permanent secretary who is also the principal accounting officer) downwards and includes relationships with arm’s length bodies (including SOEs) and third-party delivery partners.