OECD Guidelines on Corporate Governance of State Owned

OECD Guidelines on Corporate Governance of State Owned Enterprises Lars Johan Cederlund Senior advisor Ministry of Industry, Employment and Communications, Sweden Chairman OECD Working Group on Privatisation and Corporate Governance of State Owned Assets MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

The Guidelines and the role of SOEs • • Direct application in commercial SOEs Focus on federal or state-owned SOEs Comparative report gives information Comparative report allows benchmarking MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Why Guidelines? • Need for an integrated Corporate Governance model, best practice collection • Contribution to growth from professional governance of SOE: s • Better balance between privatisation and governance was asked for by politicians MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

SOE employees as percentage of total employment in OECD countries MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Turnover/GDP and value added/GDP for SOEs in OECD countries (percent) MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Percentage of market capitalisation in OECD countries MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

New Corporate Governance model • Complement to the OECD Principles of Corporate Governance which are developed for privately-owned companies • Non-binding guidelines, agreed by member states for their proper activities, best practice • The Guidelines is an integrated product, with individual Guidelines linked/connected to the others • Do not preclude/alter Privatisation policies MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Priorities • • • Level-playing field with the private sector Reinforcing the ownership function No mixing of political and business decisions Improving transparency Empowering SOE boards MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter I, Legal and regulatory framework • • Separate regulation and shareholding Transparency on special obligations Level-playing field in markets Competitive conditions in access to finance MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter II The state as an Owner • • • Clear and disclosed ownership policy No direct interference in day-to-day activities Let boards carry out their responsibilities Centralisation/coordination of the ownership function Accountability secured Effective exercise of ownership rights MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter III Other Shareholders • All shareholders should be treated equitably • High degree of transparency towards all shareholders • Facilitate participations in AGM for minority shareholders MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter IV Stakeholders • Rely on OECD Principles of Corporate Governance • Report on stakeholder relations • Develop, implement and communicate compliance with codes of ethics MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter V Transparency • • • Basis for much of the other Guidelines Disclosure at ownership level and at company level Internal audit Independent external audit High quality standards for accounting and audit Disclosure as listed companies Disclosure of material information, including objectives, ownership and voting rights, financial assistance from the state transactions with related entities and risk factors MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Chapter VI Boards Critical governance organ • • • Full responsibility Able to appoint CEO Act in the best interest of the company Independent judgement Good corporate governance standards Systematic evaluation MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS

Possible effects of the Guidelines • • Basis for structured reform Facilitate benchmarking Awareness of important values on the state’s balance sheet Better value-creation due to more effective corporate governance MINISTRY OF INDUSTRY, EMPLOYMENT AND COMMUNICATIONS