Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments 9789264471351, 9264471359

Citation preview

Implementing the OECD Guidelines on Corporate Governance of State‑Owned Enterprises: Review of Recent Developments

Implementing the OECD Guidelines on Corporate Governance of State‑Owned Enterprises: Review of Recent Developments

This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Please cite this publication as: OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en.

ISBN 978-92-64-99539-0 (print) ISBN 978-92-64-47135-1 (pdf)

Photo credits: Cover © reklamlar/iStock/Getty Images Plus.

Corrigenda to publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm.

© OECD 2020 The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.

3

Foreword

Governments in both mature and emerging economies are important owners of commercial enterprises and corporatised assets. These state-owned enterprises (SOEs) are an important part of a majority of world economies, including the most advanced ones. SOEs are most common in strategic sectors such as energy, minerals, infrastructure, other utilities and, in some countries, financial services. Ensuring that governments efficiently manage these assets is therefore crucial for the competitiveness of the broader enterprise sector, economic growth and sustainable development more generally. The OECD Guidelines on Corporate Governance of State-Owned Enterprises (SOE Guidelines) provide an internationally agreed benchmark to help governments assess and improve the way they exercise their ownership functions in SOEs. They provide concrete advice to countries on how to manage more effectively their responsibilities as company owners, thus helping to make SOEs more competitive, efficient and transparent. The Guidelines include a set of good practices on the legal and regulatory framework for SOEs, the professionalisation of the state ownership function and the corporate governance arrangements of SOEs. First developed in 2005, the Guidelines were updated in 2015 to take into account developments since their adoption and to reflect the experiences of the growing number of countries that have taken steps to implement them. This report documents changes in state ownership and SOE governance in both OECD and partner economies and assesses the extent to which the Guidelines have served as a “roadmap for reform” in individual countries since 2015, following the most recent update of the Guidelines. According to the Recommendation of the Council on Guidelines on Corporate Governance of State-Owned Enterprises the Corporate Governance Committee, through the Working Party on State Ownership and Privatisation Practices, is instructed “to follow up on the implementation of this Recommendation and to report to the Council no later than five years following its adoption and as appropriate thereafter.” On 15 November 2018, the Working Party, based on an issues note prepared by the Secretariat, discussed options for the fulfilment of this requirement by 2020. As part of the Working Party’s work toward assessing the implementation of the OECD Guidelines on Corporate Governance of State-owned Enterprises until the year 2020, delegates agreed to undertake a questionnaire-based exercise which aimed to stocktake and assess what changes have arisen in state ownership and SOE governance in OECD Member states and partner countries since the work towards revising the SOE Guidelines commenced (starting in 2013 and leading to the OECD Council adoption of the 2015 revision). Importantly, this exercise should not be read as penalising countries that had largely implemented the instrument prior to its revision and who therefore have little (further) progress to report. Understandably, the countries that have higher standards of SOE governance have reported less policy changes relevant to the implementation of the SOE Guidelines in the past five years to the OECD Secretariat. This stock-taking report integrates responses from the national authorities in 29 jurisdictions that are responsible for the ownership function of SOEs. The questionnaire was addressed to state-owned enterprise (SOE) ownership entities, in addition to departments of government (e.g. ministries of finance

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

4 and/or industry) with broader responsibility for SOEs. Both the initial and interim drafts of the report were subject to consultations and reviewed by the Working Party in March and October 2019. The countries that reported SOE governance changes to the Secretariat (through their questionnaire responses and a series of interviews) were: Argentina, Belgium, Brazil, Chile, the Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Israel, Italy, Japan, Korea, Latvia, Lithuania, the Netherlands, New Zealand, Norway, Poland, Slovak Republic, Spain, Sweden, Switzerland, Turkey and the United Kingdom. The United States reported that it is not aware of any policy changes in the areas covered by the SOE Guidelines during the relevant review period. As for national practices by Costa Rica, the reflected policy changes have been gathered from the latest version of the OECD Corporate Governance Review of Costa Rica, and the final version will be published in early 2020. It should also be noted that the changes in state ownership function in Austria during the review period have been reflected in this report based on the Austrian government’s presentation given during the meeting of the OECD Working Party on State Ownership and Privatisation Practices on 18 October 2019. The report was prepared by Chung-a Park with oversight from Hans Christiansen, both of the Corporate Governance and Corporate Finance Division in the OECD Directorate for Financial and Enterprise Affairs. It also benefits from comments and inputs from Korin Kane. Editorial and project co-ordination were provided by Katrina Baker, Elisabetta Pilati and Edward Smiley. This report complements an earlier stock-taking publication, OECD (2011) Corporate Governance of StateOwned Enterprises: Change and Reform in OECD Countries Since 2005. Another publication, OECD (2018) Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, documents the current status quo in individual countries regarding aspects of their ownership practices and SOE corporate governance. It will be revised and updated to reflect information included in the present report. It is available as a “living document” on the Working Party’s website www.oecd.org/corporate/soes.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

5

Table of contents Foreword

3

Executive summary

7

1. Introduction References

2. Legal and regulatory framework for the state ownership function (Chapter I and Chapter II of the SOE Guidelines) Main trends National developments References Notes

3. State-owned enterprises in the marketplace Main trends National developments References

4. Equitable treatment of shareholders and other investors Main trends References Notes

5. Stakeholder relations and responsible business Main trends National developments References

6. Disclosure and transparency Main trends National developments References

7. The responsibilities of the boards of state-owned enterprises Main trends National developments References Notes

9 13

15 16 19 36 36

37 38 38 40

41 42 45 45

47 48 48 52

53 54 54 63

64 65 65 75 75

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

6

Annex A. OECD questionnaire for the progress report on changes in national SOE ownership and governance practices over the last five years (2013-2018 period)

77

FIGURES Figure 1.1. Number of countries with policy changes with respect to the implementation of the SOE Guidelines during the review period (2013-2018) 10

INFOGRAPHICS Infographic 1.1. How countries have implemented the OECD Guidelines on Corporate Governance of StateOwned Enterprises

12

TABLES Table 1.1. Policy changes in the implementation of the SOE Guidelines during the reviewed period (2013-2018) Table 2.1. State enterprise ownership rationales and/or governance in 30 jurisdictions Table 2.2. Material changes in the way the state exercises its role as an active and informed enterprise owner Table 2.3. National approaches to exercising the ownership function: Changes in the 2013-2018 period Table 4.1. Changes in national corporate governance codes or SOE-specific codes Table 6.1. Information disclosure practices in Latvia: Changes in the 2013-2018 period Table 7.1. Changes in the composition of SOE boards of directors in Estonia (%)

11 17 30 35 43 58 70

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

7

Executive summary

Notable changes have taken place in the corporate governance of SOEs over the last five years in a majority of the countries reviewed by this report. Twenty-eight individual countries including 26 OECD countries and two partner countries have undertaken recent reforms in at least one policy area covered by the OECD Guidelines on Corporate Governance of State-Owned Enterprises and consistent with the Guidelines’ recommendations. Countries that practiced relatively high standards of SOE governance at the time of the SOE Guidelines revision in 2015 report in 2019, as would be expected, relatively few policy changes relevant to the implementation of the Guidelines. Based on the information from the participating countries, progress has indeed taken place, mainly in areas such as the state ownership function, disclosure and transparency, responsibilities of boards of SOEs and stakeholder relations and equitable treatment of shareholders and other investors (i.e. national corporate governance codes). According to the findings, there is an increasing tendency toward establishing mechanisms for ensuring transparency and accountability of the state’s exercise of ownership rights through developing a rationale for state enterprise ownership, establishing a centralised or co-ordinated state enterprise ownership function and undertaking regular and publicly disclosed aggregate reporting on the SOE sector.

Key findings 

Around two-thirds of the surveyed countries have put in place or updated key elements of their ownership policies and key objectives during the period under review. They have taken steps to separate ownership and regulatory functions and are in the process of improving ownership policies and SOE governance through laws, regulations, company-specific acts or the code of conduct for SOEs. Some countries have also improved the more general legal and regulatory frameworks for SOEs. With the still ongoing fiscal tightening in some countries, notable efforts have been made to facilitate commercialisation of SOEs, particularly through incorporating SOEs under the company law.



Ownership of SOEs in several other countries is still exercised on an ad-hoc basis by individual ministries rather than on a whole-of-government basis. A couple of post-transition economies have even closed their state ownership entities (or ministries) during the period under review. In those countries the set of laws that concern the legal form of SOEs and provide the framework for the governance and operation of SOEs remains complex. Reforms to streamline this complex set of laws and its SOE governance framework should be a priority for the concerned countries.



Less than one-fourth of the reviewed countries have reported changes in their legal regulatory frameworks and national practices relevant to ensuring competitive neutrality in the presence of SOEs during the relevant time period. Several countries have pursued competitive neutrality to a certain degree in various ways through ownership, competition, public procurement, tax and regulatory policies or a combination of these policies. With an increased presence of commercially

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

8 oriented SOEs, regulatory agencies and competition authorities should be empowered to enforce safeguards against market distortions and ensure the full and impartial implementation of all relevant laws and regulation. 

Around half of the reviewed countries report having made progress regarding “equitable treatment of shareholders”, which is a trend that is contrary to what was identified in the 2011 progress stocktaking report. They have made material changes in practices in the reviewed period concerning equitable treatment of SOE shareholders particularly by subjecting SOEs wholly or partially to national corporate governance codes (or SOE-specific codes where applicable).



One third of the reviewed countries also report progress toward establishment of government policies, requirements and expectations regarding responsible business conduct (RBC). This seems to indicate an increasing awareness among policy makers of the importance of RBC as a core business issue within the corporate sector. Inter alia, increasing pressure to improve accountability and transparency in all forms of corporate behaviour is supporting innovations and improvements in practices by SOEs.



Governments are increasingly aware that high standards of transparency and accountability are critical for ensuring efficiency and performance of SOEs. Governments have consequently translated their awareness into relevant legal regulatory frameworks. Two-thirds of the reviewed countries have implemented aggregate reporting during the review period, or have enhanced the disclosure systems regarding the annual reporting that they had already in place. At the same time, while there is a clear tendency for enhanced disclosure and transparency in line with the SOE Guidelines, the relevant subject areas vary greatly across different countries. Most commonly included subjects are the state ownership policy, financial statements, employment in SOEs, public policy objectives and board composition. Ensuring a comprehensive legal regulatory framework and policies for an implementation of a whole-of-government basis still remains a challenge when enhancing transparency of SOEs.



Around two-thirds of the reviewed countries have made notable efforts, and reported progress, in enhancing the professionalism and governance of SOE boards of directors. However, among the surveyed countries, only four have implemented a comprehensive board nomination framework consistent with best practices in stock-market listed companies. Another three report having made steps in this direction, including also with regards to enhancing the autonomy of boards in appointing and dismissing CEOs. In a majority of the surveyed countries, criteria and conditions for independence of SOE board members are in most cases not explicitly defined in their legislations. Framework for nominating and appointing board members and senior executives should be more transparent and consistent since some countries report cases of close ties between the senior executives and the political decision makers which can affect the decision process for appointment.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

9

1. Introduction

This introduction presents the methods for the development of this report as well as aggregated results from the participating countries.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

10 

This report sheds light on progress and changes regarding national practices with regard to each chapter of the OECD Guidelines on Corporate Governance of State-Owned Enterprises (“SOE Guidelines”) since work commenced on revising the SOE Guidelines in 2013. The report is based on a survey of state-owned enterprise (SOE) ownership entities and of departments of government (e.g. ministries of finance and/or industry) with broader responsibility for SOEs– together totalling participation of 29 different countries. The respondent countries consist of 27 OECD Member countries and 2 OECD partner countries. Drawing on practices in these countries, the report covers: 

Organising the state enterprise ownership function;



Safeguarding a level playing field between SOEs and private businesses;



Equitable treatment of shareholders and other investors;



Stakeholder relations and responsible business;



Transparency and disclosure practices; and



Professionalising boards of directors.

The report supports policy makers by facilitating greater awareness and more effective implementation of the SOE Guidelines.

Figure 1.1. Number of countries with policy changes with respect to the implementation of the SOE Guidelines during the review period (2013-2018) Progress

Limited progress

No changes

Regression

Responsiblities of boards of SOEs Disclosure and transparency Stakeholder relations and responsible business Equitable treatment of shareholders and other investors Competitive neutrality in the market place in presence of SOEs State ownership function Recurrent review and public disclosure of ownership rationale 0

5

10

15

20

25

30

35

Source: OECD, based on national questionnaire responses and interviews with national authorities.

This report is organised according to the chapters of the SOE Guidelines. The implementation of each chapter is treated in a separate sub-section, except for chapters 1 and 2 which are treated jointly as, in practice, it is often impossible to disentangle legal and regulatory change affecting the two.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 11

Table 1.1. Policy changes in the implementation of the SOE Guidelines during the reviewed period (2013-2018) Countries

Rationales for state ownership

State ownership function

Legal regulatory framework to ensure competitive neutrality in the market place in presence of SOEs

Equitable treatment of shareholders and other investors (i.e. changes in national corporate governance codes)

Stakeholder relations and responsible business

Disclosure and transparency

Responsibilities of boards of SOEs

Argentina

-

●

-

-

-

●

●

Belgium

-

●

-

-

-

-

●

Brazil

-

●

-

-

-

●

●

Chile

-

●

-

●

●

●

●

Costa Rica

-

●

●

-

-

●

●

Czech Republic

-

●

-

●

●

●

●

Estonia

-

●

-

-

-

●

-

Finland

●

-

-

●

-

●

●

France

●

●

●

-

-

●

●

Germany

-

●

●

●

●

●

●

Greece

-

●

-

-

-

-

-

Hungary

-

●

●

-

●

-

●

Iceland

●

●

-

-

-

●

-

Israel

-

●

●

-

●

●

●

Italy

●

●

-

●

-

●

●

Japan

-

-

-

●

-

●

-

Korea

-

●

-

●

●

●

●

Latvia

●

●

●

●

●

●

●

Lithuania

-

●

-

-

-

-

●

Netherlands

-

●

-

●

-

-

-

New Zealand

-

●

-

-

-

-

-

Norway

●

●

-

●

●

●

-

Poland

●

●

-

●

●

●

●

Slovak Republic

●

●

-

●

-

●

●

Spain

-

-

-

-

●

-

●

Sweden

-

●

-

●

●

●

-

Switzerland

●

●

●

●

●

●

●

Turkey

-

●

●

-

-

-

●

United Kingdom

-

●

-

●

-

●

-

United States

-

-

-

-

-

-

-

Source: Author based on the information from national authorities.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

12 

Infographic 1.1. How countries have implemented the OECD Guidelines on Corporate Governance of State-Owned Enterprises

Improved Implementation of the

OECD Guidelines on Corporate Governance of State-Owned Enterprises Proportion of the 31 Countries who Made Progress

2/3 Undertaking regular and publicly disclosed aggregate reporting

2/3

1/2

Professionalising boards of directors

Equitable treatment of shareholders and other investors

1/3 Stakeholder relations and responsible business conduct

Ownership Practices Room for Improvement

Incremental Efforts

..But ownership often still exercised on an adhoc basis by individual ministries

Policy documents on board nomination practices and clearer objectives for individual SOEs

Upward Trend Centralisation or co-ordination of ownership function…

Country Examples

Comprehensive board nomination framework to empower SOE boards to appoint the CEO Israel, Norway, Sweden

Establishment of new national CG code that is applicable to listed SOEs Czech Republic, Finland, Latvia, Lithuania, Slovak Republic

Continued or stronger emphasis on gender equality on SOE boards Finland, Germany, Israel, Korea, New Zealand, United Kingdom, Spain, Sweden

Requirements for SOE board obligations to establish internal controls, ethics and compliance measures Czech Republic, Hungary, Israel, Korea, Latvia, New Zealand

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 13

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 15

2. Legal and regulatory framework for the state ownership function (Chapter I and Chapter II of the SOE Guidelines)

According to the OECD Guidelines on Corporate Governance of StateOwned Enterprises, the state should act as an informed and active owner, ensuring that the governance of SOEs is carried out in a transparent and accountable manner. This chapter provides an overview of various country efforts on improving the legal regulatory framework for the exercise of the state ownership function through adoption of the co-ordinating agency model and/or other requirements of the law. Insofar as these changes have introduced greater transparency regarding the rationales for state ownership and improved coordination of state ownership practices across the public administration, around two thirds of the reviewed countries have brought national practices closer to the standards of the SOE Guidelines during the review period. However, in several other countries, ownership of SOEs is still exercised on an ad-hoc basis by individual ministries rather than on a whole-of-government basis.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

16 

Main trends Around two thirds of the reviewed countries have seen changes in the last five years in the overall objectives and governance of state ownership. They have made efforts to improve the legal regulatory framework for the exercise of the state ownership function through adoption of the co-ordinating agency model and/or other requirements of the law. Insofar as these changes have introduced greater transparency regarding the rationales for state ownership and improved coordination of state ownership practices across the public administration, they have brought national practices closer to the standards of the SOE Guidelines. At the same time, there is still a strong continued decentralisation of state ownership portfolios in some countries. Mostly, these countries have yet to develop an explicit, whole-of-government ownership policy clearly outlining the rationales for state ownership. Such departures from the “ownership centralisation” standard of the SOE Guidelines have been mitigated in several countries through the recent introduction of policy documents (e.g. on board nomination practices, internal controls, etc.) establishing corporate governance requirements or standards applicable to all SOEs. In this respect, Argentina and Chile have issued corporate governance guidelines on a comply-or-explain basis. However, the Argentinian government has not yet articulated the rationales for state ownership nor an ownership policy. Also, except for listed companies, there is no proper establishment of commercial and/or sectorial objectives in the country. In several economies, such as Argentina, Brazil, Chile and Costa Rica, the set of laws that concerns the legal form of SOEs and provides the framework for the governance and operation of SOEs remains complex. For instance, many SOEs in those countries have been established by statutory laws with differing requirements, while some of their subsidiaries have a varying, corporatised legal form. Reforms to streamline this complex set of laws should be a priority for the concerned countries. In response to questions about the rationale for state ownership a number of countries invoked recent privatisation experience, citing privatisation as evidence that a rationale for ownership was no longer present. For example, in Israel, Italy and Japan there have been no significant changes in the rationales for state ownership, but in accordance with the government’s existing privatisation policies and their stronger focus on commercial orientation of SOEs, some important sales of shares by the government have taken place in the past five years, which are elaborated below. The Norwegian government has also indicated in the latest 2014 white paper a clear intention for strengthening private ownership in the country and reducing direct state ownership over time. In the government’s view, private ownership should be the main rule in Norwegian business and industry and direct state ownership should be accompanied by a special justification. Austria, Poland and the Slovak Republic have made it clear in their new legislations and policy documents that they do not intend to undertake further full-scale privatisation in the future. Some countries have moved towards a more decentralised state ownership model. Both Poland and the Slovak Republic terminated the existence of their state ownership entities. In 2017, Poland liquidated the Ministry of Treasury, which previously had exercised most ownership. In 2015, the Slovak Republic terminated the existence of the National Property Fund, which had exercised state ownership rights in 33 out of 92 SOEs at central government level and used to be the biggest ownership entity in the country. In Poland, the previous tasks of the Ministry of Treasury have now been divided among several ministries with a co-ordinating role for the Prime Minister. Similarly, in Hungary, more than 100 companies have been moved from state holding company MNV Zrt. to other ownership exercising entities. The ownership exercisers are now mostly ministries and ministers without portfolio. It is not clear whether the ministers without portfolio oversees SOEs at arms-length considering its close links to the political powers. However, the development of several key ownership policy documents coordinated at the level of the Prime Minister in Poland also suggests a significant effort to make ownership practices consistent in the context of a decentralised system, which would be considered in line with the SOE Guidelines. Also, as for the

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 17 Slovak Republic, it remains to be seen whether the Ministry of Economy acting as successor of the now defunct National Property Fund and new Act on Strategic Enterprises will help mobilise institutional efforts to enhance the co-ordination function of state ownership. The reviewed countries’ material changes in the state ownership function with respect to disclosure requirements and board nomination practices are elaborated in the sections 6 and 7 respectively.

Table 2.1. State enterprise ownership rationales and/or governance in 30 jurisdictions Country

Type of rationale

Source of rationale/state ownership policy Decision, regulation or decree

Policy statement

Specific legislation

SOE-specific measures

Soft law/guidelines

-

● ●

-

●

-

-

-

-

-

-

-

● ●

●

-

● -

-

-

●

-

-

Argentina

Implicit

Belgium

Implicit

Brazil

Implicit

Chile

Explicit

Costa Rica

Implicit

Czech Republic

Explicit

● ● ● ●

Estonia

Implicit

-

-

Finland

Explicit

-

-

-

Explicit

● ●

-

France

●

-

-

Germany

Explicit

-

-

Greece

Implicit

-

Hungary

Explicit

● ●

-

Iceland

Explicit

-

-

Israel

Explicit

●

●

Italy

Implicit

-

-

● ● ● ● ● ● ●

Japan

Implicit

-

-

-

Korea

Explicit

●

-

Latvia

Explicit

-

-

Lithuania

Explicit

-

Netherlands

Explicit

-

New Zealand

Explicit

Norway

-

-

●

●

-

-

-

-

-

-

-

● ●

-

-

-

-

-

-

● ● ●

-

-

●

-

-

-

-

-

●

-

●

Explicit

●

-

-

-

-

Poland

Explicit

-

-

-

Implicit

-

-

● ●

-

Slovak Republic

-

-

Spain

Implicit

-

-

-

●

-

Sweden

Explicit

-

-

● ●

-

Explicit

● ●

-

Switzerland

-

-

Turkey

Implicit

-

-

-

-

-

United Kingdom

Implicit

-

-

-

-

-

N.A.

-

-

-

-

-

United States

-

Source: Author based on questionnaire responses from the national governments and OECD (2018)

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

18 

Box 2.1. Privatisation and the broadening of ownership of SOEs in Israel, Italy and Japan Israel, Italy and Japan have undertaken some important sales of government shares in line with their privatisation policies, which have consequently influenced the overall state ownership frameworks in all three countries. In the past three decades the majority of SOEs in Israel were privatised. In the past 5 years, major developments in this regard were the privatisation of the Israel Military Industries (IMI), which was completed in 2018, and the commencement of partial privatisation processes of the Israel Postal Company and the Israel Port Companies. In 2014 the government passed a resolution regarding a multiyear plan for privatisation of SOEs, mainly through the public offerings of minority interests in the companies. In Italy, during the last 5 years, several SOEs were divested by Initial Public Offerings (IPOs) and specific decrees were issued in order to maintain a relevant supervision of the public tasks managed by these companies. Also, the country has seen some material changes in the financial and non-financial objectives of individual SOEs. In order to limit the State owner’s involvement in commercial activities of SOEs, which could potentially cause a market bias, the government indicated new rules in a Consolidated Act on Public Participated Companies (Legislative Decree no. 175 – issued on August 2016) in order to prevent public administration from establishing new companies whose purpose is to produce goods and services, which are not strictly necessary for the pursuit of their shareholders’ institutional mandate. The same Act also aims at restricting the public administration from financing SOEs which have reported losses in previous years). In Japan, while there have been no significant changes in rationales for state ownership in the past five years, in accordance with the government’s privatisation policy, several important sales of shares by the government took place in the same period. From 2014 to 2016, 5.8% of issued stocks of the Japan Telegraph and Telephone Corporation (NTT) were sold for JPN 657 billion leaving the government to hold one third of the company’s shares, which is a minimum holding requirement by law. In 2013, 16.7% of issued stocks of JT were sold for JPN 976 billion, leaving the government to hold one third of shares, which is a minimum holding requirement by law. From 2015 to 2017, 43.1% of stocks issued by Japan Post Holdings were sold for JPN 2.83 trillion. In 2016, Kyushu Railway Company (JR Kyushu) was listed on stock exchanges, and 100% of issued stocks were sold for JPN 416 billion, which eventually led to full privatisation of JR Kyushu. Source: Questionnaire responses from national governments.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 19

National developments Changes to the state ownership function State-owned enterprises in Argentina are in general governed in a decentralised manner by their sectoral ministries without a proper SOE performance management system in place. While the government has not yet articulated rationale for state ownership nor an overall ownership policy, the objectives of most enterprises are nonetheless specified in their respective statues or creation laws. Two SOEs have been recently created by a presidential decree, “Contenidos Públicos SE” and “Corredores Viales SA” (Public Contents State-Society and Road Corridors Company). At the same time, Argentinian SOEs have been going through important reforms since the change in government in 2015. The SOE reform has been facilitated by a strong political will for the reform, introduction of some degree of a co-ordinating function through the Chief of the Cabinet of Ministers (Jefatura de Gabinete de Ministros– JGM) and promoting international co-operation including undertaking an OECD Review of the SOE sector in Argentina. As part of the reform efforts, the government has developed the Good Governance Guidelines 1, a comply-or-explain guide for good governance of SOEs in 2018. In Austria, a new law entered into force on 1 January 2019, replacing the state holding company, Austrian Federal and Industrial Holdings (ÖBIB), with a new organisation called Austrian Holdings AG (ÖBAG). The purpose of the reform is to actively exercise Austria’s ownership responsibilities, regain its strong representation on the supervisory boards of the partially state-owned companies and give ÖBAG a degree of flexibility to effectively cope with developments at owner level. The conversion of ÖBAG was decided at the General Meeting of Shareholders, and the Finance Minister appointed a 9-member Supervisory Board. The new structure should enhance the autonomy of the holding company, but whether or not the government will in practice exercise control over the company’s board should be monitored. The Austrian government at the time of publication of this report has stakes in companies including the oil company ÖMV, Austrian Post and Telekom Austria. Both the government and ÖBAG have made it clear that they have no plans to sell them for now and that privatisation is not their objective. In Brazil, a major headway regarding ownership policy during the review period is the enactment of the Decree No. 8945/2016 in the year 2016, which led to an establishment of State Responsibility Law No. 13303/2016 in the same year. Reflecting some elements of the SOE Guidelines and good governance practices laid down in the Brazilian market law, the new Law established new corporate governance rules for SOEs owned and controlled by the federal government. The Law has requirements on transparency, accountability, risk management and internal control practices including having a Statutory Audit Committee as an auxiliary body of the Board of Directors. The Law is applicable to all companies that are under the supervision of the Secretariat of Coordination and Governance of State-Owned Enterprises DEST (or SEST in Portuguese) attached to the Ministry of Planning, Development and Management, as well to SOEs held at the provincial or municipal level. Under these, there is Federal Law 6,404 (dated 15 December 1976) which governs all listed and unlisted companies in the country. In addition, the government issued the Decree 9,589, dated 29 November 2018, stipulating procedures and criteria applicable to liquidation process of SOEs controlled directly by the federal government. Under the Corporation Law, all state-owned joint stock companies are considered to be commercial entities regardless of their corporate purposes. The enhanced legal regulatory framework for SOEs has introduced some degree of separation of ownership and regulatory functions through the DEST’s role in co-ordinating ownership policies and expectations, taking over some of those responsibilities from the individual line ministries. As of now, the state ownership functions are mostly shared between the DEST, the Ministry of Finance and the line ministries. As such, it can be said that Brazil follows a hybrid ownership model of which regulatory

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

20  arrangements can be described as something between co-ordinated and decentralised. In 2016, the Ministry of Transparency (CGU) and the Ministry of Planning issued an instruction aimed at enhancing internal controls and risk management of public entities including SOEs. In Chile, Public Enterprises System (Sistema de Empresas Públicas, SEP) which is a main ownership entity of the government, has made efforts to enhance soft-law regulations such as the Corporate Governance Guidelines (hereinafter the ‘SEP Code’) by adding new chapters on procurement, relations with audit entities, crisis management, and responsible business conduct. The SEP Code, first drafted in 2008 includes corporate governance rules and a set of ethics. To strengthen reporting systems to monitor and assess SOE performance and compliance with governance standards, the state ownership entity has also specified additional indicators in the new Chapters of the SEP Code. In mid-2018, the SEP Council approved a regulation for the appointment of board members in SEP SOEs. In the course of its OECD accession review process, Costa Rica created the ownership entity Presidential Advisory Unit (PAU) in 2018. The Council of Government’s Secretary has been appointed as the Head of the PAU and the unit received three additional analysts, with an intent to add additional staff in the coming years. The PAU has developed and issued an ownership policy entitled Protocol of Understanding of the Relations between the State and the Enterprises under its Property on 13 October 2019. The Protocol also contains a discussion of the rationale for state ownership and expresses Costa Rica’s commitment to improving the direction of SOEs governed by the Executive Branch and seeks to implement the principles and guidelines of good corporate governance adopted by the international community, with particular reference to the G20 and the OECD. The PAU has issued an aggregate report on SOEs with financial and non-financial information on SOE performance and governance practices; nominations policy; a website to manage board nominations; and legal requirements for compliance with IFRS. Additional legal and regulatory changes include a law to remove the Minister of Energy and Environment from the Board of the state-owned petroleum refinery company RECOPE; submission of a draft law to Congress to remove the Minister of Agriculture from the board of the institution that supervises the national liquor production company FANAL; a decree on boards’ roles and responsibilities; and a decree on transparency of SOEs. In the Czech Republic, while there were no changes in the institutional arrangements for the exercise of the state ownership function during the review period, the government has made some important changes to the legal regulatory framework for governing SOEs. Ownership policies are determined (state enterprises are regulated) through legislation, in particular by the Act No. 77/1997 Coll. on SOEs (State Enterprise Act), which has been regularly updated. The last amendment was made by the Act No. 253/2016, Coll., which became effective as of 1 January 2017. The amendment refined the definition of a state enterprise as a legal entity as well as a state organisation that carries out business with state property in its own name and under its own responsibility. The amendment also defines competences and responsibilities of directors and members of supervisory boards of SOEs and their relationships with the Founder's Ministries. Over 2015-2017 the Government Anti-Corruption Strategy focused on formulating a state ownership policy around a related Action Plan for Fighting Corruption. According to this Strategy, the Ministry of Finance prepared a draft of the state ownership policy for the government in 2017. Estonia hasn’t developed an explicit ownership policy document. State specific requirements on managing and controlling SOEs are stipulated mainly in the State Assets Act and other regulations related to auditing and public procurement. During the recent years, Estonia has compiled two reports about ownership policy– the green book for detecting problems concerning SOE ownership policy and the white book providing potential solutions. Following one of the proposed solutions, the Nomination Committee for SOE supervisory board members was established. The State Budget Act was amended to include a net debt regulation that is applicable to SOEs belonging to the central government sector. Such regulation has been put in place to meet the Maastricht criteria of EURO zone. Additional change has been reflected in the IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 21 Auditing Act to improve the independence requirements of audit committee members from SOEs and from the controlling owner. In Finland, the ownership policy is determined through cabinet decision in the beginning of each electoral term, which is four years. The current ownership policy paper was published on 13 May 2016, but will be updated in the end of 2019 by the new cabinet following general election in May 2019. In France, in line with the SOE Guidelines, the government formalised for the first time in 2014 an investment principle for the State as a shareholder. The State Shareholder Guidelines were published in 2014 to clarify the role of the State shareholder with four key objectives, including: (i) to ensure that the government has a controlling interest in companies of strategic public interest operating in critical areas for France’s sovereignty; (ii) to guarantee the existence of resilient corporations so that they can fulfil the country’s basic needs; (iii) to support corporate growth and consolidation, especially in sectors and industries that are important for French and European economic growth and, (iv) to bail out companies on an ad-hoc basis and in compliance with EU regulations in cases involving systemic risk. Given the growing economic challenges and considering that intervention of the state shareholder remains indispensable to the national economy, the French government concluded that it is necessary to be more selective with respect to shareholding and change this principle. The government has also noted that there are public equity investors (Bpifrance) that follow complementary investment doctrines. As such, in 2018, the government further clarified its role as a shareholder and now plans to shift the focus of the portfolio of the government shareholding agency (APE: Agence des Participations de l’Etat) to the following three priority areas. 

Strategic companies that contribute to the sovereignty of France (i.e. defence and nuclear)



Companies participating in public/national/local service missions for which the State does not have sufficient non-shareholder levers to protect public interests



Interventions in companies when there is a systemic risk

The main development in recent years affecting the State shareholder is introduction of Ordinance No. 2014-948 dated 20 August 2014 relating to the governance and capital transactions of companies with public participation. The Ordinance enhances a legal regulatory framework applicable to the State shareholder since it has taken into account the evolution of good governance practices by bringing those companies with public participation closer to the common law of companies (See Box 2.2.).

Box 2.2. Ownership policy reform in France: Ordinance No. 2014-948 Ordinance No. 2014-948 has strengthened the role of the State both as a shareholder and as an administrator, with as much weight and authority as a reference shareholder under ordinary law. This ordinance has simplified the administrative rules applicable to the State shareholder and has reduced the number of applicable procedures or thresholds, in particular with regard to the rules applicable to capital transactions. Thanks to this modernisation of the governance framework of public enterprises, the State now exercises its role through the APE in governance bodies within the following standardised governance framework for SOEs: 

Clarification of the role of the administrators appointed or proposed by the State (only one representative of the State legal person generally resulting from the APE, possibility of proposing to the general assembly the appointment of a certain number of administrators according to the level of state ownership);

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

22    

Distinction between the State’s role as a shareholder and its other roles as a client or a regulator whose representative sits as a Government Commissioner; Possibility for the State to propose to the General Assembly directors from an extended pool (public or private), in order to benefit from their experience; Preservation of certain specificities of publicly-owned enterprises, in particular the representation of employees in governance bodies.

The Ordinance was ratified by the Law No. 2015-990 of 6 August 2015 for economic growth and equality of economic opportunities. The Law also reintroduced the mechanism known as "offers reserved for employees" when the State sells a stake held in a company whose shares are listed (Article 31-2 of Order No. 2014-948). Several new regulations applicable to all companies including SOEs particularly concern the activity of a State shareholder as the following:  



Law 2014-384 of 29 March 2014 generalises the double voting right in listed companies. Law No. 2016-1691 of 9 December 2016 on transparency and anti-corruption has notably modernised the approval system for remuneration of leaders of listed companies (Article 161) by putting in place a binding vote of shareholders in any joint stock company whose securities are admitted to trading on a regulated market. Law 2017-399 of 27 March 2017 on the duty of care of parent companies and ordering companies (Article L. 225-102-4 of the French Commercial Code) provides for the obligation for companies or French groups of a certain size, to establish and implement effectively a “plan of vigilance”.

Source: Questionnaire response from the French government.

In Germany, the ownership policy is mainly determined through legislation (Bundeshaushaltsordnung– “Federal Budget Code”). The policy was not reviewed within the relevant time period. Management of SOEs is defined by soft-law entitled “Principles of Good Corporate Governance for Indirect or Direct Holdings of the Federation”, which include (i) the Public Corporate Governance Code of the Federation, (ii) Guidance Notes on Good Corporate Governance of Corporations in which the Federation holds an equity share, and (iii) Appointment Guidelines. The Public Corporate Governance Code of the Federation is not applicable to any companies in which the Federation holds an equity share that are listed on a stock exchange and are thus subject to the German Corporate Governance Code (DCGK) 2. The Principles have not been reviewed within the time period relevant for this paper but they are currently under review and are scheduled to be finalised by 2020.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 23

Box 2.3. Changes in Germany’s reporting system to monitor SOE performance In 2016 the German Federal Ministry of Finance implemented a “standardized monitoring system” (Standardisiertes Beteiligungsmonitoring, SBM) for state-owned SMEs upon request of the German Parliament (i.e. the Federal Finance Panel, “Bundesfinanzierungsgremium”). In 2017 the German Ministry of Finance further implemented a monitoring system designed specifically for the company group DB AG and its subsidiaries (DB AG monitoring). Both monitoring systems are designed to provide the government authorities responsible for federal holding management and Federal Finance Panel with an analysis and alert tool that shall inform about potential financial business risks and shall avoid unexpected burdens on the federal budget. Standardized Monitoring System (SBM) Currently, the SBM is conducted at the beginning of each year based on the companies’ financial statements for the previous fiscal year. The uniform calculation of financial ratios and description of each companies’ business situations in one standardised data sheet per SOE increases transparency and comparability within the portfolio of the federal holdings management. The SBM focusses specifically on companies that are engaged in economic or commercial activities. Thus, the following SOEs are currently not covered by the SBM:    

SOEs that receive government grants; SOEs within the financial sector that are monitored by the Federal Financial Supervisory Authority (BaFin); Companies listed on the stock exchange and rated by international agencies, e.g. Deutsche Post AG, Deutsche Telekom AG; Small SOEs with annual sales of less than EUR 5 million.

DB AG monitoring A monitoring specifically designed for the state owned company Deutsche Bahn AG (German Railway, DB AG) has been implemented. The monitoring is conducted twice a year based on selected financial ratios and the DB AG Interim report (January through June), and the DB AG Integrated report (January through December), respectively. Similar to the SBM described above, the selected relevant company information is presented in one standardised data sheet. The data sheet is however adjusted to cover DB AG specific issues, e.g. the company’s foreign operations or capital expenditures. Source: Questionnaire responses by German authorities.

In Greece, SOEs are governed by Law 3429/2005 (SOEs and Public Entities Law) and Law 2190/20 (General Corporate Law for Societe Anonymes (SA)). Law 4548/2018 constitutes an amendment to the General Corporate Law (Law 2190/20) which had previously represented the Greek legal framework for societes anonymes (SA). The degree of state supervision up until 2019 has been dependent on the share capital of the company (threshold of EUR 3 million). This has been abolished and replaced by the size and type of the SA. According to the new Law, a SA should be registered with a prior approval by the supervising authority, in case of a large undertaking of a public interest entity or an entity licensed by the Capital Market Committee. In line with the new Law, the financial statements for all SAs (including non-listed SOEs) should be prepared according to the Greek Accounting Standards which have adopted the International Accounting Standards (IFRS). However, the Law has not yet articulated a rationale for state ownership.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

24  In 2014 the government established the “Privatisation & Equity Management Unit” within the Ministry of Finance, a state ownership entity which is responsible for monitoring the compliance of SOEs with the legal framework for SOEs (Law 3429/2005), exercising voting rights for all SOEs under the form of S.A., appointing the board of directors in collaboration with line ministries and monitoring the internal auditor function in large SOEs. In 2016, the state established the SA Hellenic Corporation of Assets and Participation (HCAP), a holding company aiming at grouping and managing a wide range of Greek State owned assets and participations was established with a mandate to own and manage a great number of assets belonging to the Greek State. Inter alia, the new Law got rid of a Public Holdings Company (EDIS), transferred the State’s shares in the 17 SOEs directly to HCAP and increased the maximum number of members of HCAP’s Board of Directors, from seven to nine. The HCAP is subject to all relevant legislations for SA and additionally the Ministry of Finance has mandated it and its affiliated companies with its strategic objectives. A management information system has been established within SOEs to monitor their performance. In Hungary, until May 2018, the state holding company MNV Zrt. was entitled to exercise the ownership rights over all state assets based on the 2007 Act CVI. which defines major rules on how SOEs should be managed or controlled. With the Decree No. 1/2018 (VI. 25.) NVTNM on designation of the institutions that are responsible for exercising state ownership rights in SOEs, more than 100 companies have been moved from MNV Zrt. to other ownership exercising entities. The ownership exercisers are mostly ministries and ministers without portfolio. The Government Decree 94/2018. (V. 22.), which came into force under the new administration, further defines the new exercisers of the state ownership rights for all SOEs and has established the position of the Minister without portfolio responsible for managing national assets. It declares the responsibilities of the Minister without portfolio, who is responsible for supervision of national assets, regulation of the management of national assets, national utilities, national financial services, post service, and supervision of gambling organisations. However, it is not clear whether the Minister without portfolio oversees SOEs at arms-length considering its close links to the political powers. In Iceland, the current ownership policy was introduced in 2012. The new Icelandic law on Public Finance, Act No. 123/2015 was approved by the Parliament in December 2015. Article no. 44 of the Law provides for the government to publish ownership policies for its majority owned enterprises. A specific ownership policy for financial enterprises managed by the Icelandic State Financial Investments was first released in 2009 and updated in 2017 and the Ministry is currently in the process of updating its ownership policy for all other SOEs, as well as specific objectives for individual enterprises. The new Act provides for the Minister of Finance and Economic Affairs to formulate an ownership policy for all SOEs. The general ownership policy shall set out a rationale or objectives of the central government with respect to such ownership, roles of different government offices, as well as the governance principles that SOEs should adhere to, including the division of responsibilities and accountability mechanisms between the owner, the boards and management. The Act also provides that the Minister may adopt a special ownership policy for certain individual enterprises if their unique circumstances require a more detailed policy or owner objectives than provided by the general policy. The Minister of Finance and Economic Affairs or, in specific circumstances, the line minister concerned or the government entity representing the State’s ownership interest in the enterprise, shall monitor the compliance of SOEs with the ownership policy. Where the central government is not the only owner of the enterprise, the members of the enterprise’s board of directors elected to represent the central government shall take account of the main considerations set out in the ownership policy adopted for the field of activities or the enterprise concerned. The Minister of Finance and Economic Affairs makes nominations to the boards of directors of enterprises in which the central government holds an ownership interest, based on ability, education and experience. The Minister establishes rules on general and objective conditions for the selection of members to such boards and makes these public as part of the ownership policy.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 25 Korea has an explicit ownership policy for SOEs which is determined by legislation and government decree in the form of the Act on the Management of Public Institutions enacted in 2007. The ownership entity— the Ministry of Economy and Finance and other responsible ministries are required to regularly review and revise its ownership policy. While the ownership policy has been to some extent subject to political orientation of each administration, main pillars of the Act on the Management of Public Institutions– such as performance evaluation and disclosure– have been steady. There have been a total of 18 amendments of the Act between 2007 and May 2019. Latvia has a predominantly decentralised ownership structure, with line ministries in most cases exercising ownership, but has taken steps towards centralisation by establishing a coordinating agency and has continuously made efforts in improving the legal regulatory framework for the state ownership policy through implementation of the co-ordinating agency model and other requirements of the law in the review period. State ownership policy in the country is determined by the State Administration Structure Law, Law on Governance of Capital Share of a Public Person and Capital Companies (hereafter– Law on Governance of Shares) and three subordinate regulations issued during the 2015-2016 period by the Cabinet of Ministers. The Law on Governance of Shares was approved by the Parliament (Saeima) in 2014, replacing a previous law. It was subject to amendments three times in 2015, 2016 and 2018. The rationale of state ownership is defined in the State Administration Structure Law. Latest amendments of this law concerning the rationale of state ownership were approved by the Parliament in October 2015. Previously, the law included six criteria as preconditions for state ownership but after the amendments the number of criteria was reduced to three– market failure, strategic goods and services that are important for state development and security. With the adoption of the Law on Governance of Shares and Capital Companies on 1 January 2015, the Cabinet of Ministers has reassessed the ownership of each SOE and approved the general strategic objective of each SOE. As such, most SOEs now have formally approved strategic objectives (including public policy objectives) as part of their business strategies. Reasons for the updates of strategies and financial and non-financial objectives of individual SOEs are mostly changes in a market situation and/or strategic political orientations of the Government. An EU-financed research project was also recently undertaken on possible categorisation of SOEs depending on characteristics of their activities and financial models. There is an ongoing policy discussion on this issue. The Law on Governance of Shares and Capital Companies introduced role of Coordination Institution – for which the CSCC was appointed by the decision of Cabinet of Ministers on 12 May 2015. As such, from 1 June 2015, the CSCC is responsible for coordination of corporate governance of SOEs. This makes Latvian ownership model halfway between centralised and decentralised. The State Social Insurance Agency (SSIA) also has transferred to SOE – “Privatization Agency” (PA) – the state shares in 29 companies by July 2015, which according to the decision of the Cabinet of Ministers were planned to be sold. The transfer of capital shares to the PA by 1 July 2015 was provided for by the Transitional Provisions in the Law on Governance of Shares. The remaining state shares supervised by SSIA in five companies was transferred to the PA separately by the decision (regulation) of Cabinet of Ministers on 21 October 2015 and were planned to be sold. A number of new regulations of Cabinet of Ministers were adopted during 2015 and in the first half of 2016 which guide the operations and procedures of CSCC, shareholders, line ministries; the Ministry of Finance and the Cabinet of Ministers regarding such issues as annual evaluation of SOEs’ operational and financial results; prediction and determination of the dividend pay-out by SOEs; regulations regarding the nomination of candidates for the board and the council in SOEs; regulations on the number of the board and council; maximum remuneration levels in SOEs and regulations regarding alienation of state shares by the Privatization Agency. The shareholder reports the results of SOEs to the CSCC, which in turn prepares the annual aggregated report on SOEs. It is then presented to the Cabinet of Ministers and the Parliament (Saeima).

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

26  While Latvia may have legislated the separation of ownership and regulatory functions within individual line ministries, SOEs are still not operating under an ownership structure where an ownership agency is empowered to be responsible for setting and monitoring shareholder expectations in all SOEs and line ministries have no part in state ownership functions. In Lithuania, the ownership policy is determined in the Ownership Guidelines (approved by the Government Resolution number 665 “On the Approval of the Procedure for the Implementation of the State’s Property and Non-Property Rights at State-Owned Enterprises”, 2012). The main purpose(s) of state ownership is specified in the ownership policy. The main principles related to ownership have remained the same during the relevant period. The Ownership Guidelines outline the rights and responsibilities of all state ownership entities regarding the implementation of SOE governance arrangements and define how SOEs should be managed or controlled. The latest material amendment on the Ownership Guidelines passed on 20 June 2018. After this amendment SOEs were no longer classified into groups according to their objectives for the state and the rate-of-return on equity is applied to all SOEs engaged in substantial commercial activity. During the last 5 years the State has re-arranged mechanisms for setting financial and non-financial objectives to improve performance of SOEs. First of all, the State shifted from single ROE target for all commercial (or partly commercial) SOEs to individual ROE targets for commercial activities of each SOE. Since 2017 the State also rearranged dividend pay-out policy, which is now closely linked with ROE of SOEs. According to national legislation, each SOE is obliged to pay percentage amount of distributable profit as dividends to the State each year. SOE with higher ROE is allowed to pay lesser percentage of distributable profits as dividends to the State. Rationale behind is to encourage SOEs to pursue higher return ratios and invest into more profitable projects. Finally, since the year 2017 the State made amendments in the law and introduced a target setting tool called ‘Letter of Expectations’. Through this tool each ownership ministry is required to draft Letter of Expectations for each controlled SOE where it sets broad financial and non-financial expectations for SOE. Considering the large number of SOE managers, government plans to centralize the management of SOEs through reorganisation, restructuring, liquidation or privatisation by 2023, reducing the number of state ownership entities from 14 to 8. Implementing reform priorities is crucial as SOEs continue to play a key role in undertaking large energy and transportation infrastructure projects. Government also needs to develop a comprehensive plan for developing a pool of SOE specialists. The Netherlands has changed the national lottery and Holland Casino from a foundation to a corporation. All SOEs in the country are now corporate entities. As for board nomination practices, the new policy takes diversity in board composition more into account although not binding. There have been changes in the maximum in variable pay and secondary benefits (i.e. severance pay) regarding remuneration policies for SOE boards. New Zealand has an explicit ownership policy through State Owned Enterprises Act 1986 3 with additional ownership monitoring guidance issued by the Treasury, established in July 2012 and entitled the Owners Expectation Manual.4 In 2018 the Manual added slightly more stringent guidelines in two areas: (i) where SOEs make significant capital investment decisions, including lowering the threshold for SOEs requiring shareholder approval; and (ii) new guidance on board of directors performance evaluations, including the requirement for 3 yearly, independent board evaluations. Norway updated its rationales for state ownership during the review period. The Norwegian government reviewed and revised its ownership policy in the 2014 White Paper (Report to the Storting No. 27 on Diverse and value-creating ownership). According to the 2014 white paper, all companies in which the state has direct ownership are categorised into four different categories based on the state’s rationale and objective with respect to its ownership5. At the same time, certain SOEs have changed category following the white paper. The main change, compared to the previous policy, relates to how the government views the purpose of the state’s ownership. The government states in the 2014 white paper that it wants to IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 27 strengthen private ownership in the country and reduce direct state ownership over time. In the government’s view, private ownership should be the main rule in Norwegian business and industry, and direct state ownership should be accompanied by a special justification. While the government’s overall policy on how the state intends to exercise its ownership did not change substantially in the 2014 white paper, progress on more generally accepted corporate governance principles in recent years has led to a further development of the state’s ownership role.

Box 2.4. Norway’s state ownership policy The Norwegian government’s ownership policy is explicitly expressed through white papers that are presented to (but not subject to approval by) the Norwegian Parliament (Stortinget). A new white paper on ownership policy is normally published following a parliamentary election approximately every four years. The purpose of a white paper on ownership policy is to express the government's overall objectives of state ownership and specifically for each individual company in which the state has a shareholding. Furthermore, the paper states how the government intends to exercise its ownership. Since 2006, the state's portfolio of companies has been categorised into four categories based on the state's rationale and objectives for state ownership. The current white paper on ownership policy (Report to the Storting (White Paper) no. 27 (2013-2014) Diverse and value-creating ownership) was published in 2014. In practice, the state's direct ownership is exercised by the government through different ministries. Ownership of the majority of companies with commercial objectives (with some notable exceptions) is managed by the Ownership Department of the Ministry of Trade, Industry and Fisheries, and ownership interests in companies with sectoral-policy objectives are exercised by the ministries responsible for the respective sectors. While there have been no changes to this institutional arrangement as such, some SOEs have been transferred from one ministry to another (mainly due to a change in categorisation, i.e. the governments rationale for owning the company, and further consolidation of ownership of commercial companies under the national ownership entity). Sources : Questionnaire responses from Norwegian authorities.

In Poland, the government led a fundamental change in the model of corporate governance for SOEs by liquidating the Ministry of Treasury in 2017 based on the conclusions that ownership transformation was no longer necessary and that privatisation or the disposal of individual parts of state property was not a primary purpose of supervision. This means a new approach towards the management of the State Treasury, including redefining of the role and meaning of companies with State Treasury shareholding. According to the government, while privatisation will not be a priority for management of state-owned entities, the entities with a small State Treasury shareholding or under liquidation will continue to be privatised. The government has also recognised that the existing regulations were no longer in line with market expectations and has required organisational changes. In particular, the government found that a significant number of companies with minority shareholdings, often of significant importance to the state’s economy were beyond the real impact of the regulations. Reflecting these changes in government intentions and objectives, the new Law on State Property Management was established in 2016. The management policy of each company defines its own development goals in accordance with the law and general guidelines of the Prime Minister.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

28 

Box 2.5. Act on the management of state-owned property in Poland In accordance with the provisions of the new Act on the management of state-owned property and in order to co-ordinate the exercise of the powers vested in the State Treasury in companies, the Prime Minister may determine the rules of ownership supervision and good practices followed by the State Treasury as a shareholder, in particular in the field of corporate social responsibility, dividend policy, sponsorship, and remuneration formation. In this context, the Prime Minister has approved the following documents:    

Principles of corporate governance over companies with the participation of the State Treasury; Directions of ownership policy in the field of disposal of shares owned by the State Treasury; Guidelines for selecting and cooperating with an audit firm examining the company's annual financial statements; and Guidance for companies with the State Treasury participation preparing financial statements for 2017 and for 2018.

Both relevant legal acts and other documents are to change according to the needs (there are no specific deadlines). Sources: Questionnaire responses from national authority.

The 2017 liquidation of the Ministry of Treasury, which previously had exercised most ownership, could be seen as a move towards decentralisation of the state ownership function. However, the development of several ownership policy documents coordinated at the level of the Prime Minister also suggests a substantial effort to harmonise ownership practices in the context of a decentralised system, which would be considered in line with the SOE Guidelines. The previous tasks of the Ministry of Treasury were divided among several ministries with a co-ordinating role for the Prime Minister. The Prime Minister’s co-ordinating role is specified in several corporate governance policy documents applicable to SOEs. The main legal act regulating the principles of the ownership supervision over SOEs is the 2016 Act on the Management of State Property. The Act states that “the Prime Minister may determine the rules of ownership supervision and good practices followed by the State Treasury as a shareholder, in particular in the field of corporate social responsibility, dividend policy, sponsorship and remuneration formation”. According to the Program Manifesto of the Government of Slovak Republic over 2012-2016, the country terminated the existence of the National Property Fund on 15 December 2015, a move that could be seen as further contributing to decentralisation of the state ownership function. The Fund was previously in charge of implementing privatisation projects and had exercised state ownership rights in 33 out of 92 SOEs at the central government level, being the biggest ownership entity in the country. Ownership rights of those 33 SOEs have been shifted to sectoral ministries, most of them to the Ministry of Economy. The Program Manifesto sets out a plan to prepare a new version of the Act on Strategic Enterprises and also includes a ban on privatisation of the state's strategic assets. According to the Constitution of the Slovak Republic (Article 113), a new government administration is required to submit its Program Manifesto to the National Council of the Slovak Republic within 30 days of its appointment by the President. Only when the National Parliament adopts the Program Manifesto and grants its confidence to the government will the new government be able to start exercising its powers. It remains to be seen whether the Ministry of

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 29 Economy and the new Act on Strategic Enterprises will efficiently mobilise institutional efforts to harmonise and mobilise ownership practices. In Sweden, state ownership is reviewed and revised whenever required. Since 2017, the ownership policy is adopted by the shareholders’ meeting of the majority-owned SOEs, which implies that the policy is legally binding. In accordance with its current ownership policy, the government has further undertaken centralisation in the past five years. A specialised ownership unit is responsible for managing 40 out of 46 SOEs. Seven SOEs were added in 2015. With an increasing number of SOEs, efficient management is even more essential. In Switzerland, the basis for specific legislation for ownership governance is conceived in the “Corporate Governance Report” (2006) and condensed in 37 guidelines by the Federal Council (executive government authority). It is determined by the Decree of the Federal Council and has been acknowledged by the competent parliamentary committees (without enactment by the Parliament). The provisions for parliamentary oversight are enshrined in the Art. 28 of the Federal Act of the Federal Assembly. Since the ownership policy is conceived as a long-term instrument, reviews are not undertaken on a regular basis. Yet amendments are possible if needed. In Mid-2018 the Federal Council mandated the Finance Ministry (together with two line ministries) to have Corporate Governance practices (federal level) reviewed by external experts and published publicly. Despite the experts’ overall positive review of the ownership model operation, the experts have made 14 recommendations and the implementation process is still ongoing. There are further developments of the existing legislations and guidelines including the new 2016 edition of the “Model Law for statutory entities with services in state monopolies” and the “Model Law for statutory entities with tasks for economic and safety supervision”.

Box 2.6. Legal forms of incorporation of SOEs in Switzerland Firstly, the Federal Council decided in January 2018 to sell Alcosuisse AG, a former profit centre of the Swiss Alcohol Board (SAB), to a private company. Secondly, on 1 January 2018, a new law came into force to transform an extra-parliamentary Commission for Technology and Innovation into an independent statutory entity called “Innosuisse” so that it is compliant with the corporate governance guiding principles of the Confederation (e.g. the Federal Council sets strategic objectives). Previously, there was no clear distinction between strategic and executive/operative tasks and furthermore the setup had lacked independent supervision. Thirdly, in order to ensure equal rights for all railway companies to use the Swiss railway network, the Swiss Train paths Ltd. is in the process of preparing timetables for the use of the network, co-ordinating the resolution of conflicts between applicants and optimising the application processes. The Swiss Train path Ltd is a not-for-profit company limited by shares. All four shareholders– among them railway companies such as SBB– have the same minority shareholding and the same voting rights. In order to further reduce potential discrimination, the Parliament decided to establish an independent statutory entity called the “train path allocation service (service d’attribution des sillons)”. In September 2018, the Parliament adopted the Federal Act on the Organization of Railway Infrastructure. The law is expected to enter into force in 2020. Sources: Questionnaire responses from the government of Switzerland; the Federal Council, the portal of the Swiss government https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-69703.html, https://www.admin.ch/opc/fr/federalgazette/2018/6097.pdf, https://www.bav.admin.ch/bav/fr/home/themes-a-z/reforme-des-chemins-de-fer/organisation-infrastructureferroviaire-obi.html.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

30 

The United Kingdom does not have an overarching or singular approach to determining the objectives of state ownership. The key consideration with regard to ongoing government ownership is the balance between public service/policy and achieving value for the taxpayer. Decisions on assets are taken on a case-by-case basis by the sponsoring department. HM Treasury, as part of its role overseeing public finances, keeps public ownership of assets under regular review. UK Government Investments (UKGI), a government company owned by HM Treasury, performs the shareholder function for a number of SOEs and government owned assets. As of April 2019, UKGI performs this function for a portfolio of approximately 17 entities. The legal forms of incorporation of SOEs in the UK are varied. These include non-departmental public bodies, executive agencies, trading funds, and statutory corporations (entities established by legislation which take the form of limited companies wholly owned by the government).

Table 2.2. Material changes in the way the state exercises its role as an active and informed enterprise owner Countries Board nomination practices

Nature of Change

Belgium

A Royal Decree of 25 April 2014 provides for the Board of Directors of the National Railway Company SNCB to include 3 representatives of regional authorities appointed by the King on the proposal of the respective Regions. Since 2016, the law of 21 March 1991 provides for two members of the Board of Directors to meet the criteria listed in Article 526ter of the Companies Code, with the exception of 5 °, c) (independent director).

Estonia

Main change has been implemented in the supervisory board nomination process. The so called Nomination Committee was established in 2017 by the Government to ensure transparent and competence-based selection of supervisory board members. The committee has six members of whom four are from private sector (including the chairman of the committee) and two are from public sector. The committee's task is to propose candidates for supervisory boards to shareholding ministries. The shareholding minister has to base the decision on the proposal of the Nomination Committee and if the proposal is not acceptable to the minister, then the committee has to propose a new candidate within 15 working days. Potential conflicts of interest of related persons of proposed supervisory board members are required to be taken into account.

Germany

As of 1 March 2015 the Act on Equal Participation of Women and Men in Executive Positions in the Private and Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst) is in effect. Purpose of the law is to raise the percentage of women in leadership positions in the private sector, the federal administration and regarding board seats to be nominated by the federal government.

Korea

A new clause for enhancing transparency in the process for recommending and nominating SOEs was added in 2016. Under the Clause, the Committee for recommending CEOs for SOEs is required to keep minutes of each meeting and make them 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 provide for eligibility criteria for CEOs taking into account specialities and requirements of the corresponding corporation or institution.

Lithuania

The Law on State and Municipal Enterprises was amended in 2014, notably allowing for state enterprises include independent members, requiring that they make up at least 1/3 of all board members for large statutory SOEs. Amendments also include requirements for ownership entities to define specific selection criteria and publish board positions according to a pre-determined timeline. More detailed procedure for nominating board members was adopted in the Government Resolution No. 631 “On the Approval of the Procedure for the Selection of Candidates to the Board of a State Enterprise or Municipal Enterprise“, 2015. The amendments to the Resolution No. 631 passed in 2017 established nomination procedures to the boards and supervisory boards of all SOEs and municipality-owned enterprises. The amendments to the Law on State and Municipal Enterprises (entered into force on January 1, 2019) changed previous provisions and established requirement for at least 1/2 of all board members in state enterprises to be independent. According to the amendment, independent board members must be selected using head hunting agencies.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 31 Countries

The setting and monitoring of objectives and mandates for individual SOEs

Reporting systems to monitoring, audit and assess SOE performance

Nature of Change

Netherlands

Takes diversity in board composition more into account although the policy is not binding.

Turkey

In 2018, along with the Decree Law No:703, board nomination/appointment proceedings began to be made by President or a ministry to be appointed (formerly board members were appointed by relevant/sectoral ministry and Treasury and Finance Ministry).

Hungary

At the end of 2018 a unified controlling reporting system was developed, which includes specific indicators and presentations for each SOE under the control of the NVTNM. The controlling reports are prepared monthly, which makes possible to keep an eye on the owner's expectations and the fulfilment of the numbers of the business approved by the owner, throughout the year. These reports include a unified management information layout, which makes the exercise of state ownership rights easier.

Latvia

With an adoption of the Law on Governance of Shares (2014), financial and non-financial objectives of SOEs are set by the highest-decision making body – the Cabinet of Ministers, involving the shareholder and also the approval by State Secretaries. Prior to the approval by State Secretaries, the objectives are sent to the co-ordination entity CSCC and/or respective sectoral ministries for opinions.

Lithuania

The objectives of SOEs are set in enterprise’s strategy. According to the amended Ownership Guidelines dated June 2018, the strategy is prepared and approved with respect to the letter of expectations. The authority representing the state first has to reconcile the letter of expectation with Governance Coordination Centre before submitting it to the SOE. In such manner, Governance Coordination Centre actively participates in formation of SOEs objectives, including advisory and methodological assistance to SOEs on preparation of strategies.

Netherlands

Determined a required return for each SOE.

Sweden

Process for setting public policy targets was developed and was specified in the state ownership policy in 2014. Public policy targets have been set for 10 of the total of 22 SOEs that are endowed with public policy assignments and have been adopted by the shareholders’ meeting.

Brazil

To strengthen its institutional co-ordination role for corporate governance, the SEST created Corporate Governance Indicator (IG SEST), through which it assesses compliance of SOEs with the Law 13303 (dated June 30, 2016) regulated by the Decree No. 8.945 ( dated 27 December 2016) and guidelines on best market practices and higher standards of corporate governance established in the Resolutions of the Inter-ministerial Commission on Corporate Governance and Administration of Corporate Shareholdings of the Federal Government (CGPAR). The CGPAR was created by the Decree No. 6.021 (January 22, 2007). In addition, an interactive tool called the State-wide Outlook was created. It is updated daily and presents information on federal state enterprises such as quantitative data on direct or indirect control of the Union, dependence on the National Treasury, economic analysis of financial data, personnel profile and others.

Germany

In 2016 the German Federal Ministry of Finance implemented a “standardized monitoring system” (Standardisiertes Beteiligungsmonitoring, SBM) for state-owned SMEs upon request of the German Parliament (i.e. the Federal Finance Panel, “Bundesfinanzierungsgremium”). In 2017 the Ministry of Finance further implemented a monitoring system designed specifically for the company group DB AG and its subsidiaries. Both monitoring systems are designed to provide the government authorities responsible for federal holding management and Federal Finance Panel with an analysis and alert tool that shall inform about potential financial company risks and shall avoid unexpected burdens on the federal budget.

Hungary

From 2019, Eximbank is required to apply IFRS standards for audit in compliance with the respective EU regulations. During 2013-2018, MNV Zrt. (Hungarian National Asset management Company) operated a KIR system (Controlling Information System) which was inclusive of the Early Warning system as a general management tool. At the end of 2018 a unified controlling reporting system was developed, which includes specific indicators and presentations for each SOE under the control of the NVTNM. The controlling reports are prepared monthly, which makes possible to keep an eye on the owner's expectations and the fulfilment of the numbers of the business approved by the owner, throughout the year. These reports include a unified management information layout, which makes the exercise of state ownership rights easier.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

32  Countries Italy

Nature of Change In 2016, with the approval of Consolidated Act on SOEs, the government introduced requirement of an extraordinary auditing on public holdings for the first time, to be completed by state and local entities by the end of 2017, and then each subsequent year. The communication of such stock-takings must be sent to the special Section of the State Court of Auditors and to dedicated offices of the Ministry of Economy and Finance, which were established – under the provision of the same law – in the Department of the Treasury and are in charge of the following functions: Co-ordination and offering official advice in the fields of implementation of the Consolidated Act, as well as promoting best international practices in managing public companies; Monitoring activity related to the assets registered during the above mentioned stocktaking; and setting up of plans for enhancing efficiency of SOEs that the interested public administrations can adopt in the future. Pursuant to article 13 of Law 474/1994, the Ministry of Economy and Finance – Department of the Treasury is required to transmit to the Chambers of Parliament an updated report after the conclusion of every transaction regarding the divestment of SOEs. The last report was finalised in 2016 and illustrated the sales of tranches for companies directly owned by the Ministry of Economy and Finance, which in the 2015-2016 period involved ENEL, Poste Italiane and ENAV.

Disclosure requirements for SOEs, including public disclosure

Dialogue with external auditors and

Latvia

With an adoption of the Law on Governance of Shares (2014), in addition to any previously existed mechanism for monitoring and assessing SOE performance, state shareholder function is overseen by the CSCC and more comprehensive reporting standards have been introduced. The monitoring of non-financial goals is performed by line ministries on either monthly, quarterly or annual basis, The monitoring of financial goals is performed by the shareholder on either monthly, quarterly or annual basis and by the CSCC on an annual basis.

Lithuania

Public enterprise Monitoring and Forecasting Agency (MFA), which is responsible for monitoring of SOE portfolio during last 5 years developed wide monitoring tool – SOE Good Corporate Governance Index. Index facilitates monitoring and evaluation of SOEs’ governance in three major SOEs’ governance fields: Transparency, Boards of Directors, Strategy setting and implementation. Index annually evaluates performance and compliance with provisions of local legislation and international good corporate governance practices typically based on OECD guidelines. Results and findings of Index are provided in aggregate report to the Government and to the public. Company-specific reports are produced and presented to each SOE or ownership ministry.

Poland

The corporate governance system in Poland requires an analysis of information obtained directly from the companies, made by employees of the supervision departments in individual ministries and in the prime minister's office, as well as on direct supervision made by members of supervisory boards. Employees of supervisory departments receive from the concerned company information on important issues, including quarterly information on the economic and financial situation (so-called F01). These information are sent in paper form, as well as are entered into the Integrated Informatics System (socalled ZSI), which is a large database comprising information over all SOEs. The supervisory staff also prepare the general shareholders' meetings in which issues regarding the functioning of companies are considered. In the most important companies, the Prime Minister also approves voting instructions for the general meeting of shareholders. This is the change introduced by the Act on the Management of State Property dated 16 December, 2016.

Estonia

The requirements of disclosing financial information has been changed for bigger SOEs (those who fulfil the obligatory audit committee criteria – ca 1/3 of SOEs) to follow as much as possible the practices of publicly listed companies. Previously, only the quarterly financial information was disclosed but now those have to be complemented with explanations/overviews of the activities and also important events have to be published on SOE’s website.

Hungary

The Public Procurement Act has been amended from 1st April 2019, where the obligation to publish certain documents of public procurement procedures through EKR (Electronic Public Procurement System) is raised from a Government degree to Act.

Lithuania

On 11 August 2016 the Government approved amendments to the Transparency Guidelines providing that all large SOEs are obliged to adhere to the provisions of the Transparency Guidelines on a mandatory basis (instead of “comply-or-explain” basis) including the application of the International Financial Reporting Standards

Estonia

The requirement that the supervisory board has to meet the external auditor before the approval of annual report has been added. The auditor has to give to the supervisory board an overview about the auditing process and findings.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 33 Countries

Nature of Change

state control organs

Lithuania

The Law on Audit of the Financial Statements (amendments from March 2017) provides that large SOEs are considered as public interest entities and therefore they are subject to additional and strict requirements in the field of audit of financial statements. The large SOEs must compose the audit committee with the functions provided by the Law on Audit of the Financial Statements and in the Regulation (EU) No 537/2014 of the European Parliament and of the Council. The responsibilities of the audit committee include: 1) the submission of its recommendation to the supervisory or management board of the SOE for the appointment of an external auditor or audit entity, 2) monitoring of the process of financial reporting, auditing, internal quality control. In the end of 2017 the amendment of the Law on Audit of the Financial Statements has established an additional function for the audit committees of listed state owned companies – submission opinion concerning related parties transactions.

Remuneration policies for SOE boards and executive management

Brazil

The Decree 8.945/2016 established that the members of the Executive Board should undertake commitments with specific goals and results to be achieved, which should be approved by the Board of Directors. Meeting these goals and results in the execution of long-term business strategy should generate financial reflection for the Executive Directors in the form of variable levels of remuneration. The goals and commitments linked to varied level of remuneration should be sent to the SEST for approval prior to the vote in the General Assemblies of Shareholders.

Czech Republic

Remuneration limits have been set according to the Resolution of the Czech Government No. 835 of 12 December 2018 on “Principles of Remuneration of Senior Executives and Board Members of Companies with the State Ownership”, which replaced the Resolution of the Czech Government No.159 of 22 February 2010 on “Principles of Remuneration of Senior Executives and Board Members of Companies with the State Ownership over 33%.” In addition, the Government AntiCorruption Strategy for the 2015-2017 period has been focusing on defining standards for nominating state representatives in SOEs and the principles for remuneration of SOEs’ board members, as well as the related Action Plan for Fighting Corruption.

Estonia

Together with the establishment of the Nomination Committee, the right/obligation of the finance minister to set limits to supervisory board members remuneration was abolished. Now the Nomination Committee proposes the remuneration conditions to the shareholding minister who decides/approves those with/on shareholders decision/meeting. The committee makes the proposals based on market conditions in peer group.

Hungary

Following the government’s issuance of its 1660/2016 Government Decree in 2016, government set up categories for SOE based on the size and the importance for the national economy. Every SOE has been classified into one of the categories and salary rate of CEOs has been determined according to the categories. It sets out when a premium can be written and under what conditions. Among other things, it also sets out the rules of factors that reduce and exclude the payment of the premium. For instance, a leader of a loss-making company cannot get any premium tasks.

Italy

Art 11. Para 6 of Legislative Decree 175/2016 provides that the maximum yearly compensation for any manager/worker of SOEs cannot exceed 240,000 euros apart from listed companies and those with listed financial instruments issued. The above-mentioned law also states that the Minister of the Economy and Finance will formulate a ministerial decree, to define further lower compensation which will eventually be applied to the SOEs (establishing specific economic parameters from the classification of a “five group ranking”). In order to determine compensation of executive directors, the Ministerial Decree 166/2013 still applies until the above mentioned decree is issued: that is, a classification of SOEs into 3 groups, determined on the basis of relevant indicators, aimed at evaluating the organisational and managerial complexity and the economic importance of the companies involved. Such indicators to be derived from the official financial statements – are mainly quantitative, reflecting value of production; investments; and number of employees.

Latvia

The Cabinet Regulation aimed at setting the maximum remuneration levels for SOE boards and executive management depending on the size of SOEs has been abolished since the new Cabinet Regulations on this subject were adopted on 22 December 2015. Previously, average monthly work remuneration level of persons employed in the State public sector in a previous year was used to as a reference to calculate maximum remuneration level for SOE boards and executive management but now average monthly work remuneration of the previous year of persons employed in Latvia is used instead as a reference. The information is obtained from the official statistical notification of the Central Statistical Bureau entitled “Guidelines for Determining the Remuneration of Members of the Board and the Council of Public and Public-Private Enterprises.”

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

34  Countries Lithuania

Nature of Change Remuneration of the board members are linked to CEO remuneration levels. The Ownership Guidelines recommend that the remuneration of board members for all fully corporatised SOEs be a fixed amount not exceeding 1/4 of the CEO’s total remuneration, or 1/3 for the chairman of the board. The Law on State and Municipal Enterprises states that board members remunerated from the enterprise’s funds in accordance with the procedure established by Government. It also limits the remuneration of board members to 1/5 of the average monthly salary of the CEO. The procedure of remuneration detailed in the Government Resolution No. 1092 “On Approval of the Remuneration Procedure of the Boards Members of State Enterprises and Municipal Enterprises and the Civil Liability Insurance for the Board Members”, 2015. CEO remuneration is regulated by Government Resolution No. 1341 “On the remuneration of SOEs managers”. The amendments passed in January 2016 established an ability to increase CEO salary by 75% if particular state enterprise has a status of strategic importance to national security interests, according to motivated decision of the institution implementing rights and duties of the owner. It also should be noted, that the new version of the Law on Civil Service allows for civil servants to engage in any activity which does not cause conflict of public and private interests in the civil service and the Law does not limit an ability for civil servants to receive remuneration for such activity.

Netherlands

There have been changes in maximum in variable pay and secondary benefits i.e. severance pay

Poland

Law of 9 June 2016 states the principles of shaping the remuneration of managers of companies including SOEs. The total remuneration of a member of the governing body consists of two parts: a fixed amount basic monthly salary and a variable amount. The scope of variable remuneration of a member of the management body depends on the level of achievement of management objectives. Monitoring the management board's achievement of specific goals is being carried out by the supervisory board. Management objectives can include an increase in net profit; change in production or sales, reducing losses, reducing management or operating costs, implementation of a strategy or a restructuring plan, achieving or changing specific indicators, implementation of investments, changing the market position of the company implementation of personnel policy.

Norway

The government published revised guidelines for remuneration of senior executives in companies with state ownership in 2015 . The purpose of the guidelines is to describe what the Norwegian state as an owner will emphasise when voting on the board of directors' declaration concerning the fixing of salary and other remuneration for senior executives at the annual general meeting of the shareholders or similar body. The guidelines also reflect the state's view on executive remuneration in companies where this is not a separate item on the agenda of the annual general meeting. Certain details were changed in the revision with respect to the government's view on specific remuneration arrangements such as variable pay, severance payments, and pension schemes. However no changes were made to the government's main principles.

Switzerland

The Federal Council adopted measures in late 2016 in order to steer the remuneration of Board members and Senior Executives more closely. In June 2017, the Federal Council adopted model provisions for the Articles of association and explanatory notes (terms of incorporation, statutes) in order to adopt the abovementioned measures. The provisions apply to unlisted private limited companies controlled by the Confederation in terms of capital and voting rights and domiciled in Switzerland. Annually in advance, the General Assembly (GA) has the possibility to fix an upper limit for the remuneration of the board, its president as well as for the executive committee. Additionally, the General Assembly can fix bonuses/ variable salary components and other forms of compensation. The variable salary components of members of the executive committee may not exceed 50% of the fixed remuneration and other forms of compensation may not exceed 10% of the fixed remuneration. Nevertheless, discussions in Parliament are still ongoing in order to further tighten the respective regulations. Furthermore, starting Spring 2019, vested interests of board members of SOEs (interest ties) are published in a public database by the Federal Chancellery ( See https://www.admin.ch/ch/d/cf/ko/index_kommart.html ).

Source: Questionnaire responses from national governments

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 35

Table 2.3. National approaches to exercising the ownership function: Changes in the 2013-2018 period Countries

Nature of Change

Argentina

SOEs are still governed in a decentralised manner by their sectorial ministries without proper SOE performance management system in place. However, it is important to note that the government has introduced some degree of co-ordinating function. Chief of the Cabinet of Ministers (Jefatura de Gabinete de Ministros – JGM) assumes the role of coordinator and is currently developing a policy document to set up a centralised authority for overseeing SOEs.

Brazil

State-owned enterprises are distributed among the different ministries that exist according to their area of activity. In this way, each one of the supervisory ministries is responsible for fulfilling this role. The Secretariat for Coordination and Governance of State-owned Enterprises is responsible for coordinating and aligning the performance of state-owned enterprises in order to improve the performance of the government as a shareholder of federal state-owned enterprises, in order to maximize federal government investments for the benefit of society and to standardize corporate governance policies in Brazil.

Chile

To strengthen reporting systems to monitor and assess SOE performance and compliance with governance standards, the state ownership entity has specified additional indicators in the new Chapters of SEP Code.

Costa Rica

Created an ownership entity Presidential Advisory Unit (PAU) in 2018. The Council of Government’s Secretary has been appointed as the Head of the PAU. The PAU has developed and issued an ownership policy entitled Protocol of Understanding of the Relations between the State and the Enterprises under its Property on 13 October 2019. The Protocol also contains a discussion of the rationale for state ownership and expresses Costa Rica’s commitment to improving the direction of SOEs governed by the Executive Branch and seeks to implement the principles and guidelines of good corporate governance adopted by the international. The PAU has so far issued an aggregate report on SOEs with financial and non-financial information on SOE performance and governance practices; nominations policy; website to manage board nominations; and legal requirements for compliance with IFRS.

Czech Republic

The new Czech Act on Business Corporations has introduced new requirements for the 'founding deeds' (a new term coined by the Corporations Act for the founding documents of a company); all founding deeds of corporations are required to comply with the provisions set out by the Corporations Act (Act No. 304/2013 Coll. Of Laws of the Czech Republic) no later than as of July 1, 2014.

Estonia

The ministries who fulfil the shareholders tasks and the requirements for those tasks are in general the same. There are some changes of the shareholding ministries of some specific SOEs caused by changes in market regulations – the ownership role has been separated in case of electricity producer and main transmission grid enterprises – previously shareholding ministry was for both the Ministry of Economic affairs but now the electricity producer is governed by Ministry of Finance. Also in the TV and radio signal broadcaster has been moved from Ministry of Economic affairs under Ministry of Financial affairs to avoid conflict of interest between ownership and market regulation/supervision tasks. Both of these changes took place in 2013. Since 2018, the listed SOEs have an exemption from requirements of State Assets Act that are not in line with stock market regulations and would give to the state an unfair advantage compared to other shareholders. For instance, listed SOEs are not required to share minutes of supervisory board meetings with ministries anymore.

France

The main development in recent years affecting the State shareholder is the ordinance No. 2014-948 relating to the governance and capital transactions of companies with public participation. The ordinance enhances a legal framework applicable to the State shareholder since it has taken into account the evolution of good governance practices by bringing those companies with public participation closer to the common law of companies. The Ordinance No. 2014-948 dated 20 August 2014 has strengthened role of the State both as a shareholder and as a director, with as much weight and of authority as a reference shareholder under ordinary law.

Hungary

Until May 2018, state holding company MNV Zrt. was entitled to exercise the ownership rights over all state assets based on the 2007 Act CVI. which defines major rules on how SOEs should be managed or controlled. With the Decree No. 1/2018 (VI. 25.) NVTNM on designation of the institutions that are responsible for exercising state ownership rights in SOEs, more than 100 companies have been moved from MNV Zrt. to other ownership exercising entities. The ownership exercisers are mostly ministries and ministers without portfolio.

Latvia

It has a predominantly decentralised ownership structure, with line ministries in most cases exercising ownership, but has taken steps towards centralisation by establishing a co-ordinating agency in the past 5 years. While Latvia may have legislated the separation of ownership and regulatory functions within individual line ministries, SOEs are still not operating under an ownership structure where the institutional arrangements provide for a complete separation of these functions

Norway

The state's direct ownership is exercised by the government through different ministries. Ownership of the majority of companies with commercial objectives (with some notable exceptions) is managed by the Ownership Department of the Ministry of Trade, Industry and Fisheries, and ownership interests in companies with sectoral-policy objectives are exercised by the ministries responsible for the respective sectors. While there have been no changes to this institutional arrangement as such, some SOEs have been transferred from one ministry to another (mainly due to a change in categorisation, i.e. the governments rationale for owning the company, and further consolidating of ownership of commercial companies under the national ownership entity).

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

36  Countries

Nature of Change

Poland

Government liquidated the Ministry of Treasury, which previously had exercised most ownership. As a result, the previous tasks of the Ministry of Treasury were divided among several ministries with a co-ordinating role of the Prime Minister. The coordinating role of the Prime Minister is specified in several corporate governance policy documents applicable to SOEs. The main legal act regulating the principles of the ownership supervision over SOEs is the 2016 Act on the Management of State Property.

Slovak Republic

According to the Program Manifesto of the Government of Slovak Republic 2012-2016, the country terminated the existence of the National Property Fund on 15 December 2015. The Fund was previously in charge of implementing privatisation projects and had exercised state ownership rights in 33 out of 92 SOEs at central government level, being the biggest ownership entity in the country. Ownership rights of those 33 SOEs have been shifted to sectoral ministries, most of them to the Ministry of Economy.

Sweden

Government has further undertaken centralisation in the past five years. A specialised ownership unit is responsible for managing 40 out of 46 SOEs. Seven SOEs were added in 2015.

Source: Questionnaire responses from national authorities

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018a), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2018b), OECD Review of the Corporate Governance of State-Owned Enterprises: Argentina OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en. Rubens Fontes Filho and Francisco Alves (2018), Control mechanisms in the corporate governance of state-owned enterprises (SOEs): A comparison between Brazil and Portugal, http://www.scielo.br/pdf/cebape/v16n1/en_1679-3951-cebape-16-01-1.pdf.

Notes 1

http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/306769/norma.htm

2

An English translation of the DCGK is also available online : www.dcgk.de//files/dcgk/usercontent/en/download/code/170214_Code.pdf 3

www.legislation.govt.nz/act/public/1986/0124/latest/whole.html#DLM98050

4

https://treasury.govt.nz/sites/default/files/2015-09/comu-oem12.pdf

5

The companies have been categorized into four categories since 2006.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 37

3. State-owned enterprises in the marketplace

According to the OECD Guidelines on Corporate Governance of StateOwned Enterprises (SOE Guidelines), where state-owned enterprises (SOEs) engage in economic activities, those activities must be carried out in a way that ensures a level playing field and fair competition in the marketplace. While there is consensus on this recommendation in principle, obtaining a level playing field is sometimes more complicated in practice, particularly when SOEs combine economic activities with non-trivial public policy objectives. The SOE Guidelines include a number of recommendations for how the legal and regulatory framework for SOEs can meet this challenge. Noting that the reviewed countries have reported the least changes in their legal regulatory frameworks and national practices relevant to ensuring competitive neutrality in the presence of SOEs over the past five years, this chapter provides several examples of national approaches to competitive neutrality and enhancing public procurement rules.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

38 

Main trends Less than one-fourth of the reviewed countries have reported changes in their legal regulatory frameworks and national practices relevant to ensuring competitive neutrality in the presence of SOEs over the past 5 years. As elaborated below, several countries have pursued competitive neutrality to a certain degree in various ways through ownership, competition, public procurement, tax and regulatory policies or a combination of these policies. Further measures to ensure market consistency of debt and equity financing, suitable complaints handling, enforcement and implementation mechanism in consistency with international commitments are recommended. It should also be noted that where state enterprises are compensated for their public service obligations companies should account separately for economic and non-economic activities. Separation of accounts allows for monitoring of public funds provided by the government for public service obligations. In the case of an internationally-active SOE this type of transparency and disclosure is important as regulators and other market actors need to ensure that the SOE does not depart from commonly accepted corporate norms or, if they do, that the nature of their operations is fully disclosed prior to their market entry (OECD, 2020b).

National developments Commitment, rules or institutions to address aspects or elements of competitive neutrality in the presence of government-controlled businesses In the Czech Republic, the elements of competitive neutrality are determined through the antitrust regulation– Act No. 143/2001 Coll., on Protection of Economic Competition, Coll. of Laws of the Czech Republic and Act No. 256/2004 Coll., on Business Activities within Capital Markets, Coll. of Laws of the Czech Republic, which have been regularly updated over the past 5 years. In France, public companies are required to be subject, like any other company, to EU competition rules, which impose a certain degree of competitive neutrality. In compliance with these rules, some public companies are active in a competitive market. In this context, French law may impose elements of competitive neutrality. For example, a public operator in charge of providing a network must be independent of any other public company and must be neutral to the companies operating the network, whether public or private. The French government is required to respect the EU rules in this area and adapt its regulations in line with developments in EU law. Thus the law 2018-515 dated 27 June 2018 for a new railway pact strengthens the rules of independence of SNCF Réseau with regard to railway undertakings (and in particular of the public company SNCF Mobility) in accordance with the provisions of the Directive 2012/34 establishing a single European railway area. In the case of Israel, the government has issued decisions on privatisations or corporate debt offerings in order to improve competitiveness and transparency in the market over the past five years. These are based on the Government Companies Law which defines how privatisation processes are executed and approves the ownership agency Government Companies Authority (GCA) – which is likewise established by the Law to carry out the decision. In Latvia, in order to enhance corporate governance of SOEs and to implement the SOE Guidelines, a new law on SOE governance entitled “Law on Governance Shares” was adopted in 2015. The new law provides updated principles of SOE governance replacing previous regulations. The Law has established “Guidelines on elaboration of mid-term operational strategy of State-Owned Enterprises” which require SOEs to clearly differentiate financial, operational and non-financial goals (public policy goals), estimate and draw costs of non-financial goals (public-policy goals). Regarding requirements on SOEs’ rates of return, operating margins and other financial performance metrics, the Cross Sectoral Centre of CoIMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 39 ordination (state ownership coordination entity), in co-operation with capital shareholders, works on methodology related defining targets for financial performance, taking into account the SOE’s public policy goals, commercial activities and main service area (healthcare, culture etc.). In Switzerland, in late 2017, the Federal Council approved the report entitled “State and competition: Impact of government-controlled companies on the competitive marketplace (État et concurrence: impact des entreprises contrôlées par l’État sur les marchés concurrentiels)”. In Turkey, in 2013, along with the Law No. 6461 on Turkish Railroad Transportation Liberalization, the operations of the Turkish Railroads Company (TCDD), which is an SOE (public economic institution), were divided into two: TCDD and Transportation Co. and railroad transportation was liberalised. TCDD became responsible for railroad infrastructure to meet public policy objectives and Transportation Co. became responsible for commercial train operations. Operations of Transportation Co. began in 2017.

Public procurement rules affecting procurement by SOEs and SOEs’ role as suppliers to other public sector institutions Costa Rica has expressed a commitment to reform its public procurement practices to reduce the use of the exception allowing direct public procurement involving SOEs. In the course of the OECD Accession process, the government has submitted a comprehensive draft legislative proposal (Bill No. 21.546) that envisages a full reform of the Procurement Law to achieve greater efficiency and competition in all public procurement procedures, including for SOEs. A second, more narrowly focused draft legislative proposal has also been submitted to Congress to address the specific concerns raised with respect to exemptions allowing SOEs to engage in or benefit from direct contracting. The Government has indicated its intent to support the more targeted bill in the shorter term with an aim to secure enactment by early 2020, while the more comprehensive reform is expected to take longer to enact. These legislative proposals are being preceded on the operational level by the introduction of an electronic platform for public procurement designed to rationalise procedures, reduce the potential for discretionary decision-making and corruption, help the State and take advantage of purchasing economies of scale. (OECD, 2020a). In France, public procurement law was amended by Order 2015-899 of 23 July 2015 aimed at transposing the 2014 Directives on the award of public contracts. State-owned enterprises, which were previously covered by Order No. 2005-649 of 6 June 2005 on contracts awarded by certain public or private persons not subject to the Public Procurement Code, are henceforth subject to the same regime as the State and public authorities. In Germany, in 2016, the Act against Restraints of Competition (Competition Act– GWB) was amended based on European Procurement Law Directives (Directive 2014/23/EU, Directive 2014/24/EU and Directive 2014/25/EU). The amendment incorporates specific case law established by the European Court of Justice that allowed exceptions for SOEs from public procurement law obligations. The former case law is now codified in Sec. 108 of the Competition Act. Sec. 108 defines circumstances under which a cooperation of government authorities as contractors and enterprises controlled by a government authority may be exempt from the restraints of the Competition Act (“in house” exception). In Hungary, the new Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement was implemented in the new Hungarian Act CXLIII of 2015 on Public Procurement. The purpose of the Act is to require contracting authorities to ensure fair competition throughout the public procurement procedures. The Act was amended on 1 April 2019, where the obligation to publish certain documents of public procurement procedures through the Electronic Public Procurement System (EKR) was established. In Latvia, SOEs are in principle subject to the same competition related laws and requirements as any other private company. There should be no differences in taxation of SOEs, access to financing and their operations in the marketplace, relative to other enterprises. SOEs are required to participate in public IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

40  procurement procedures on the same terms as any other private company. However, the Public Procurement Law is not applicable in the following cases: if the customer (usually public body) has control over supplier’s (usually SOE) strategic goals and decisions; if the supplier’s turnover is made of no less than 80% of specific customer’s service deliveries; and if there is no direct private capital shares or investments in supplier’s equity. When an SOE receives any financial aid from the state, the procedure must meet criteria set in the Law on Control of Commercial Transactions Support.

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en. Rubens Fontes Filho and Francisco Alves (2018), Control mechanisms in the corporate governance of state-owned enterprises (SOEs): A comparison between Brazil and Portugal, http://www.scielo.br/pdf/cebape/v16n1/en_1679-3951-cebape-16-01-1.pdf.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 41

4. Equitable treatment of shareholders and other investors

According to the OECD Guidelines on Corporate Governance of StateOwned Enterprises (SOE Guidelines), where state-owned enterprises (SOEs) are listed or otherwise include non-state investors among their owners, the state and the enterprises should recognise the rights of all shareholders and ensure shareholders’ equitable treatment and equal access to corporate information. The state should strive for full implementation of the G20/OECD Principles of Corporate Governance when it is not the sole owner of an SOE, and of all relevant sections when it is the sole owner of an SOE. This chapter presents material changes in national practices concerning equitable treatment of SOE shareholders particularly by subjecting SOEs wholly or partially to national corporate governance codes (or SOE-specific codes where applicable).

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

42 

Main trends In the past 5 years, around half of the countries surveyed in this report have made material changes in practices concerning equitable treatment of SOE shareholders. They have done so particularly by subjecting SOEs wholly or partially to national corporate governance codes (or SOE-specific codes where applicable). While these changes are not specific to SOEs, they do apply to any SOEs with non-state minority shareholders that are listed on a stock exchange. Notably, the Czech Republic, Germany, Italy and Latvia have made progress regarding the implementation of the G20/OECD Principles of Corporate Governance, an internationally-agreed instrument that aims at enhancing rights of shareholders and enhancing efficiency of corporate governance at the same time.

Changes in the implementation of the G20 OECD Principles of Corporate Governance that directly affect SOEs In the Czech Republic, the Czech Institute of Directors published the “Code of Corporate Governance of the Czech Republic” in 2018 which is addressed to all companies and provides practical instructions in corporate governance. Also, the G20/OECD Principles of Corporate Governance that directly affect SOEs are being continuously implemented by legislative means. This Czech Institute of Directors published the Czech translations of the “OECD Guidelines on Corporate Governance of State-Owned Enterprises” in 2017 and the “G20/OECD Principles of Corporate Governance” in 2016. In Estonia, in 2018, an exception was made to the State Assets Law, limiting the information flow from listed companies to the state in order to put the state in an equal position with minority holders. Since 2018, the listed SOEs have an exemption from requirements of the State Assets Act that are not in line with stock market regulations and would give the state an unfair advantage compared to other shareholders. For instance, listed SOEs are not required to share minutes of supervisory board meetings with ministries anymore. In Germany, the 2016 amendment of the German stock corporations Act (Aktiengesetz– AktG) resulted in several changes regarding transparency requirements for share ownership, the number of members of the supervisory board, details and requirements for the convening of a general shareholders’ meeting and procedural changes to the non-disclosure obligations of members of the supervisory board. These were appointed by the regional administration bodies (Gebietskörperschaften). In 2017, certain amendments were made to the German Limited Liabilites Companies Act (GmbHG) for the transposition of the EU anti-money laundering directive. These changes include the introduction of a transparency register which facilities access to information regarding the ownership of shares in limited liabilities companies. Further changes will be made to the AktG following the transposition of the second EU shareholders’ rights directive (SRD II). This will include new rules regarding shareholder information and identification; directors’ remuneration; related party transactions; and transparency requirements for institutional investors, proxy advisors and asset managers. These changes are currently (June 2019) in the process of being transposed into German law. Since there is no special corporate law for SOEs in Germany, these new corporate law rules apply to both privately held enterprises and SOEs. As for the German Corporate Governance Code (Deutscher Corporate Governance Kodex– DCGK) there have been several amendments in 2013, 2014 and 2015. An additional revision is planned for 2019 following the transposition of the second EU shareholders’ rights directive (SRD II) into German law. The DCGK is applicable to entities (including SOEs) that are formed as publicly listed stock corporations (börsennotierte Aktiengesellschaften). Thus, SOEs that are formed as publicly listed corporations are subject to the DCGK and not PCGK. All other SOEs are subject to the Public Corporate Governance Code (Public Corporate Governance Kodex– PCGK).

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 43 In Italy, with regard to the treatment of shareholders, the Directive (UE) 2017/828 of the European Parliament and of the Council of 17 May 2017 intended to encourage long term shareholder participation and to increase transparency between a company and its investors. The efforts concern: shareholder identification, simplification of the exercise of shareholder rights, transparency of remuneration policy for top managers and a clearer disclosure about transactions with related entities. The Ministry of Economy and Finance has undertaken a consultation, open to public comments, on the draft of the Legislative Decree for the adoption of the Directive (UE) 2017/828 (Shareholder Rights Directive) into the Italian corporate law. The deadline for the approval of such Decree was set for 10 June 2019. In Latvia, SOE operations are subject to the Law on Governance of Shares and Commercial Law. There are no differences in both laws regarding minority shareholders rights. Furthermore, SOEs in their actions have to follow Commercial Law where the Law on Governance of Shares has no regulations to solve particular issue. For example according to the Commercial Law ( section No 174.4, the annual accounts, the auditor’s opinion and the report of the council, together with a notice of the convening of a meeting of shareholders, shall be sent to all shareholders or promulgated in accordance with Sections 214 and 273 of this Law. Other minority rights are mainly stated in Commercial law sections 172.5 (Bringing an Action by the Company), 173.3 (Release from Liability), 179.4 (Approval of the Annual Accounts of the Company), 183 ( Internal Audit of the Company) 2611 (Increase of Equity Capital with a Condition) and 365 (Protection for Minority Shareholders). In addition, SOEs are required to follow the same regulations as any other private company. The state as a shareholder and SOEs must publish all basic relevant information regarding their actions according to the Law on Governance of Shares (see articles 29. and article 58 of Law on Governance of Shares). There are no specific rules for SOEs’ involvement in co-operative projects such as joint ventures and public-private partnerships. Such an involvement should be based solely on legal acts, in particular, Commercial Law.

Table 4.1. Changes in national corporate governance codes or SOE-specific codes Countries Chile

Czech Republic Finland

France

Italy

Japan

Nature of Changes The SEP has continued to enhance its ‘Corporate Governance Guidelines’ (hereinafter the ‘SEP Code’) by adding three new chapters: Procurements, Relations with audit entities, crisis management, and has updated the chapter of Responsible business conduct by adding the Shared Value perspective. “Code of Corporate Governance of the Czech Republic” was published by the Czech Institute of Directors in 2018, which is addressed to all companies and provides practical instructions in corporate governance. It replaced previous Corporate Governance Code based on the 2004 OECD Principles, which was published by Czech Securities Commission. The Corporate Governance Code has been in force as of 2015. It is applicable to all companies that are listed on Nasdaq Helsinki Ltd (Helsinki Stock Exchange), including all listed SOEs. The Code is under evaluation whether it should be amended or not. There are no SOE-specific codes in Finland, but the aforesaid general code is also applied to some extent to all SOEs. The AFEP-MEDEF Code - corporate governance code, which most listed companies refer to - has been amended several times and, for the last time, in June 2018. Most listed public companies have adhered to this code. Changes in rules guiding SOEs’ involvement in co-operative projects such as joint ventures and public-private partnership in France are elaborated in the box below. The Italian Committee for the Corporate Governance was established in June 2011, consisting of several Associations (such as ABI, ANIA, Assonime, Confindustria, Assogestioni) on behalf of different economic sectors enterprises, along with the Italian Stock Exchange SpA. In July 2018, the Committee approved some changes regarding difference in gender composition across the company bodies of management/control, promoting equal opportunities in professional careers. Thus, in accordance with the criteria established by Law No 120/2011, the current Code regulates the parity of access to the above corporate bodies in the listed enterprises, aiming for a result in gender composition equal to 1/5 of the group less represented for the first mandate, up to 1/3 for the second and third mandates. In order to ensure the greater effectiveness of corporate governance reforms, Corporate Governance Code entered into force in June 2015, laying down the code of conduct of listed companies. The Code is applied to all listed SOEs. It was revised in June 2018, further promoting the making of decisive business decisions by management, the fulfilment of the responsibilities of the board, etc.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

44  Countries Latvia

Lithuania

Netherlands Norway

Poland

Slovak Republic

Sweden

Switzerland

United Kingdom

Nature of Changes Cross Sectoral Centre of Coordination (coordination institution) has elaborated 6 Guidelines to enhance implementation of OECD guidelines on Corporate Governance of State-Owned Enterprises. All SOEs are subject to these codes, in particular those SOEs where State holds majority shares. The Guidelines cover following areas: state ownership re-evaluation and ownership rationales (2016); elaboration of medium - term operational strategies (amended 2018); annual result assessment for SOEs where state holds majority shares (2016); information disclosure (2016); board member nomination process (2017); and remuneration (2017). Implementation of the Guidelines is not legally binding due to their legal status as recommendation. A new wording of the Corporate Governance Code for the Companies Listed on Nasdaq Vilnius was approved in January 2019. 1 The Code first of all is applicable to the companies whose securities are admitted to the trading list on the regulated market Lithuania (including listed SOEs). The Code has been drafted drawing on the analogous codes, standards and principles of other states and international organisations and the G20/OECD Corporate Governance Principles. Provisions of the Code regarding transparency continue to apply also for non-listed SOEs. The national corporate governance code for listed entities was updated in 2016. SOEs are asked to comply or explain in their annual report. Norwegian Code of Practice for Corporate Governance has been amended twice during the past five years (the changes were not very substantial). The code of practice is not directly applicable for SOEs (and there are no SOE specific codes), however the government expects that all wholly owned SOEs follow the code where applicable. Furthermore, the states has ownership interests in several companies listed on Oslo Børs (the Oslo Stock Exchange) whom pursuant to the stock exchange rules are required to report on compliance with the code. Individual companies are required to prepare their own codes of good practices. An example of this is the Warsaw Stock Exchange (GPW S.A.) that prepared the code of good practice in 2016. The Guidelines are also prepared by the Polish Financial Supervision Authority (KNF). In 2016, Central European Corporate Governance Association (CECGA) issued Corporate Governance Code which was primarily targeted at companies whose financial instruments are traded on a regulated market. This Code was based on G20/OECD Principles of Corporate Governance. No Slovak SOE has its stocks traded on stock exchange but some of them has issued bonds. CECGA also launched an initiative to prepare Corporate Governance Code of State-Owned Enterprises in Slovakia based on the 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises. Working committee has been set up with participation of the Ministry of Economy, the Ministry of Justice, the Ministry of Finance and other stakeholders. The Code was finalised in 2018 but hasn’t been published yet. According to the state ownership policy, the Swedish Corporate Governance Code should be applied by the majority owned SOEs in accordance with the principle of comply or explain. National corporate governance code has changed during the review period. Revisions to both the Code and the Ownership policy are planned for the year 2020. The Swiss Code of Best Practice for Corporate Governance was updated in 2014 and 2016. There have been no changes to the SOE-specific Corporate Governance Report of 2006. However, mid 2018, the Federal Council decided to review Corporate Governance practice by external experts. The report is publicly available now and can be found at the following link https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-75607.html. The implementation process is ongoing. The most recent version of the UK Corporate Governance Code (Code) was published by the Financial Reporting Council (FRC) in 2018. The Code applies to premium-listed companies (and other companies that voluntarily choose to comply with it) for their financial years beginning on or after 1 January 2019. UK SOEs, are not legally required to observe the Code (unless premium-listed) but often volunteer to comply in order to foster best practice corporate governance principles. The SOEs within UKGI’s portfolio are encouraged to comply with the provisions of the Code. The new Code places greater emphasis on relationships between companies, shareholders and stakeholders. It also promotes the importance of establishing a corporate culture that is aligned with the company purpose and, business strategy, promotes integrity and values diversity. The new Code emphasises the importance of the following issues: (i) maintaining positive relationships between companies, shareholders and stakeholders; (ii) high quality board composition and a focus on diversity; and (iii) remuneration which is proportionate and supports the long-term success of the company. In addition, the Company (Miscellaneous Reporting Regulations) 2018 (Regulations) introduced additional requirements in relation to pay disclosure, including requirements for: (i) all listed companies with more than 250 UK employees to disclose and explain each year their company pay ratios; (ii) such companies to disclose the ratio of their CEO’s total annual pay to the median, lower quartile and upper quartile pay of their UK employees; (iii) listed companies to be more transparent about how share price growth can inflate executive pay; and (iv) remuneration committees to engage with the wider workforce on how executive pay aligns with employee pay. As with the FRC Code, UK SOEs are not legally required to observe the Regulations (unless premium-listed). In addition, the Regulations introduced a change to UK legislation affecting all large companies (public and private), requiring a company’s annual Strategic Report to include a statement describing how the company’s directors had regard to their fiduciary statutory duties when performing their duty to promote the success of the company. This change affects any UK SOEs meeting the relevant criteria regarding turnover, balance sheet total and number of employees.

Source: Questionnaire responses from national authorities

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 45

Box 4.1. Changes in rules guiding SOE’s involvement in co-operative projects such as joint ventures and public-private partnerships in France In France, the provisions of the order 2014-948 relating to the governance and capital transactions of companies with public participation may apply if the formation of the joint venture involves a transfer or acquisition transaction from another company. In some cases, especially if the operation involves exit from the public sector, such operations must be allowed. The rules on public-private partnerships have been partly revised in the past 5 years. The Public Procurement Ordinance of 23 July 2015, Decree No. 2016-360 of 25 March 2016 on public procurement and Decree No. 2016-361 of 25 March 2016 on defence or security procurement have unified and consolidated the different public-private partnership formulas into a single form: the partnership market. The purpose and scope of the partnership contracts have been redefined. The supervision of the use of these types of markets has also been strengthened in order to secure its use. Source: Questionnaire responses from French authorities.

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en.

Notes 1

Nasdaq, Corporate governance code for the companies listed on NASDAQ Vilnius, https://www.nasdaqbaltic.com/files/vilnius/teisesaktai/Nasdaq%20Vilnius%20bendroviu%20valdysenos% 20kodeksas%20(galioja%20nuo%20%202019_01_15)%20EN.pdf

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 47

5. Stakeholder relations and responsible business

The OECD Guidelines on Corporate Governance of State-Owned Enterprises (SOE Guidelines) state that the state ownership policy should fully recognise state-owned enterprises’ (SOEs’) responsibilities towards stakeholders and request that SOEs report on their reactions with stakeholders. It should make clear any expectations the state has in respect of responsible business conduct (RBC) by SOEs. Governments, the state ownership entities and SOEs themselves should recognise and respect stakeholders’ rights established by law or through mutual agreements. This chapter provides national developments relevant to RBC practices in the SOE sector especially with respect to internal controls, ethics and compliance programmes or measures. The chapter notes that increasing pressure for accountability and transparency in all forms of corporate behaviour is supporting innovations and improvements in practices by SOEs.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

48 

Main trends One third of the countries surveyed in this report have made material changes in the last 5 years in national practices concerning stakeholder relations and responsible business conduct through the establishment of government policies, requirements and expectations regarding responsible business conduct (RBC) in companies including SOEs. While most of the countries surveyed do not have an overarching policy framework to promote or implement RBC in the SOE sector, one third of the surveyed countries have taken steps to enhance RBC practices by putting in place new requirements with regard to internal controls, ethics and compliance programmes. These changes have generally resulted in a stronger alignment of national practices with the standards of the SOE Guidelines, which call for SOEs to implement high standards of responsible business conduct and for the state shareholder to explicitly disclose its expectations in this regard. This indicates that awareness of the importance of RBC as a core business issue has increased in recent years. Inter alia, increasing pressure for accountability and transparency in all forms of corporate behaviour is supporting innovations and improvements in practices by SOEs. At the same time, it is important to note that any costs related to obligations and responsibilities that an SOE is required to undertake in terms of public services and responsible business conduct should be covered in a transparent manner.

National developments a) New requirements with regard to SOE board obligations to establishing internal controls, ethics and compliance programmes or measures An amendment No. 299/2016 Coll. of Laws of the Czech Republic, to the Act on Auditors came into effect on 1 October 2016. In Hungary, in 2016, Audit Committees were established in some SOEs to monitor the effectiveness of the internal quality control and risk management systems and financial reporting process and submit recommendations or proposals to the Board of Directors and the Supervisory Board where deemed necessary. As for companies classified as government sector entities, they are either required to or recommended to set up internal control. In Israel, the Government Companies Agency (GCA) – a state ownership co-ordinating entity – has recently declared its efforts to eliminate SOE fraud, corruption and nepotism while encouraging transparency and professionalism of SOEs. Since 2014, the GCA co-operates with a dedicated police investigation unit, aimed to detect and treat fraud and corruption in SOEs. The unit operates, among other things, based on anonymous whistle blower reports and independent investigative initiatives. According to the GCA, the initiative has had a decisive deterrent effect. In Korea, following several cases of employment fraud in the SOE sector in recent years, there was an amendment to the “Act on the Management of Public Institutions” in March 2018. The amendment introduced Articles on transparent personnel management. The Minister of Economy and Finance or the head of the competent agency shall take a measure to dismiss or punish the head of a SOE/public institution if an executive of the organisation is found guilty of employment irregularities, according to review and decision by the steering committee.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 49

Box 5.1. Articles on public integrity and anti-corruption newly added to “Act on the Management of Public Institutions” in March of 2018 in Korea Article 52-5 on employment fraud 1. The Minister of Economy and Finance or the head of the competent agency in shall take a measure to cancel or give personnel-related punishment to the head of a public institution after review and decision by the steering committee if an executive of a public institution is found guilty in connection with employment irregularities. In such a case, the Steering Committee shall notify the party of its contents and reasons before its deliberations and decisions to give the party an opportunity to make an explanation. 2. The Presidential Decree shall provide the necessary matters for the criteria, contents, and procedures for cancellation of acceptance pursuant to paragraph 1. Article 52-6 on personnel audit 1. Government shall audit the appropriateness of personnel management of public institutions (hereinafter referred to as "personnel audits") as provided under the Presidential Decree to eradicate employment irregularities during misconduct, and may require the submission of relevant documents if necessary. 2. The Minister of Economy and Finance or the minister of the competent agency shall request the head of the relevant public institution to correct the violation or unfairness of the personnel audit without delay and take personnel actions against those involved. 3. The head of a public institution shall immediately implement a request under paragraph 2, if there is no justifiable reason, and inform the Minister of Economy and Finance or the minister of the competent agency of its implementation. Sources: Responses from Korean government authorities.

In Latvia, Cabinet of Ministers on 17 October 2017 adopted regulations entitled “Basic Requirements for Establishing Internal Control Systems on Corruption and Conflict of Interests risk prevention”. According to the regulations, an SOE must establish or complement existing internal risk control systems until the end of 2018, in compliance with regulations. In New Zealand, there have been updates to the Owners Expectations Manual in June 2018. Slightly more stringent guidelines were included in the Owners Expectations Manual in two areas: (i) where SOEs make significant capital investment decisions, including lowering the threshold for SOEs requiring shareholder approval; and (ii) new guidance on board of directors performance evaluations, including the requirement for 3 yearly independent Board evaluations. In Switzerland, the Federal Council has decided to supplement the strategic objectives in the area of Compliance Management System (CMS). A new CMS which is oriented to the ISO standard 19600 is now required. The implementation process is still ongoing.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

50  b) Changes in government policies, requirements and expectations regarding responsible business conduct (RBC) in SOEs. In Chile, in 2017, the SEP set the State expectations regarding RBC by organising a workshop on the preparation of sustainability reports focused on the GRI G4 sustainability reporting guidelines, with the objective of implementing sustainability reports for all SEP companies. The reports were published for the first time by the end of 2017. The SEP also organised a workshop on human rights and business for directors, which addressed various aspects of RBC. In the Czech Republic, the National Action Plan for Responsible Business Conduct has been revised and published as the Resolution of the Czech Government No. 49 of 25 January 2016. In France, the state shareholder is currently preparing a roadmap for corporate social responsibility (CSR) in its portfolio. In Germany, regarding stakeholders’ rights vis-à-vis individual SOEs, it enacted an Act in 2017 to promote Transparency in Wage Structures among Women and Men (“Transparency in Wage Structures Act”, Entgelttransparenzgesetz, EntgTranspG). This Act aims to enforce the right to equal pay for women and men for equal work or work of equal value. So as to verify compliance with the principle of equal pay within the meaning of the present Act, employees shall possess an entitlement to disclosure as described in the Act. Employees can demand information on the average monthly gross remuneration and on no more than two individual remuneration components. The individual entitlement to disclosure exists for persons employed in establishments with a workforce that usually counts more than 200 employees under the same employer, which may include SOEs. In the course of the 2018 implementation of the General Data Protection Regulation (GDPR), there are new SOE board obligations to establish internal controls and compliance measures to ensure data protection. In Korea, in 2018, under the presidential agenda to maximise social values in the public sector, the government prioritised RBC practices in the SOE sector by establishing a group of new SOE performance monitoring indices to measure aspects of SOEs with respect to job creation; provision of equal opportunity, social integration; safety and environment conservation; and ethical management. In Latvia, the Guidelines on elaboration of medium-term operational strategies state that among nonfinancial goals SOEs should also clearly state goals related to corporate social responsibility, for example, such as reducing impact on environment. It also includes a recommendation on the need to assess reputational risks, and it how SOEs may disclose information on received or made donations. In Norway, the policy regarding sustainability and responsible business conduct has developed over the years, reflecting the development of trends, and international guidelines, standards and norms like the UNGP, the UN Global Compact, the OECD guidelines on multinational companies, GRI, etc. Each white paper reflects the development, and aims to clarify the government’s subsequent expectations towards SOEs. The government holds regular meetings with the companies and undertakes regular analysis of SOEs’ work and reporting, with respect to inter alia corruption and climate. The government organises regular dialogue with the civil society to share experience and knowledge on important issues. It also arranges for the SOEs to meet and discuss dilemmas and experience regarding compliance issues and other issues relevant to RBC practices. In Poland, good practices prepared at the government level have been described in one of the points above. In addition, individual companies prepare their own codes of good practices. An example of this is the Warsaw Stock Exchange (GPW S.A.) that prepared the code of good practice in 2016. Guidelines were also issued by the Polish Financial Supervision Authority (KNF). In Spain, companies including SOEs are required to deploy an appropriate corporate social responsibility policy, and report transparently and in sufficient detail on its development, application and results.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 51 In Sweden, in 2016, the level of ambition for the work of the SOEs in the area of sustainable business was raised further by inclusion of the UN’s 2030 Agenda with 17 global Sustainable Development Goals in the state ownership policy. All SOEs should analyse the Global Goals and identify the goals that the SOE impacts on and contributes to through its operations. In Switzerland, in 2015, the Federal Council published the “CSR Document de position du Conseil Fédéral”. It states that the Confederation should act as a role model in particular when the Confederation acts e.g. as the owner of state owned companies. This role model should raise awareness within the private sector.

c) Changes in the rules or national practices bearing on SOEs’ role vis-à-vis the political system, including campaign contributions, sponsorship and lobbying In Argentina, the law established to reform financing for political parties is under review at the Congress. Some conditions for political financing by companies are published on the Argentinian government’s website. In Estonia, SOEs had the possibility until 2017 to use annually funds up to 1.5.%of their three year average net profit for sponsorship with the condition that it had to support the fulfilment of SOE objectives. From 2017, the sponsorship may be used only to support R&D activities in the field of activities of the SOE and the annual limit has been decreased to 0.5% of the three year average net profit. In France, article 11 of the law 2013-907 of 11 October 2013 covering the transparency of public life provides that some citizens send a declaration of their patrimonial situation and a declaration of interests to the High Authority for the Transparency of the Public Life. In particular, presidents and directors-general of the following organisations are identified for this reporting: 

Companies and other legal persons, regardless of their legal status, in which more than half of the share capital is held directly by the State;



State public institutions of an industrial and commercial nature;



Companies and other legal persons, regardless of their legal status, in which more than half of the share capital is held, directly or indirectly, separately or together, by the persons mentioned in 1 ° and 2 ° and whose turnover annual business, for the last financial year ended before the date of appointment of the parties concerned, exceeds EUR 10 million.

According to Article 4, The “declaration of interests” covers the following elements: 

Professional activities giving rise to remuneration or gratuity exercised on the date of appointment;



Professional activities giving rise to remuneration or gratuity exercised during the last five years;



Consultant activities performed on the date of appointment and in the last five years;



Participation in the governing bodies of a public or private body or company at the date of appointment or in the last five years;



The direct financial involvement in the capital of a company on the date of the nomination.

The law of 9 December 2016 on transparency, anti- corruption and the modernisation of economic life (known as the Sapin II law) introduced provisions relating to representatives of interests / lobbies but these are not specific to public enterprises. In Poland, the most important relevant legal act is Law of 16 December 2016 about the rules of state property management. According to art. 17, an entity authorised to exercise rights from shares belonging to the State Treasury or a state legal person is obliged to determine when a donation or other agreement of a similar effect exceeds PLN 20 000 or 0.1% of the total assets and thus obtain consent of the supervisory body and establish a contract . The determination and contract are developed by way of resolution of the general meeting or via the company's statute. IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

52 

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 53

6. Disclosure and transparency

Under the OECD Guidelines on Corporate Governance of State-Owned Enterprises (SOE Guidelines), the general public is the ultimate owner of state-owned enterprises (SOEs). Therefore, government agencies who exercise ownership rights over SOEs are ultimately accountable for the interests of the public. In this sense, high standards of transparency and accountability are needed to allow the public to assure itself that the state exercises its powers in accordance with the public’s best interest. This chapter provides an overview of various mechanisms for ensuring transparency and accountability of the state’s exercise of ownership rights including: developing robust compliance and auditing standards and regular and publicly disclosed aggregate reporting on the SOE sector.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

54 

Main trends As outlined in the SOE Guidelines, information disclosure including both financial and non-financial data is essential for the government, so that it can be an effective owner; for the Parliament to evaluate the performance of the state as an owner; for the media to raise awareness on SOE efficiency; and for taxpayers and the general public to have a comprehensive picture of SOE performance. Around two-thirds of the countries surveyed for this report have introduced or strengthened requirements for disclosure and transparency in the SOE sector in the last five years, thus bringing national practices more in line with the standards of the SOE Guidelines. Changes have included, for example, new requirements concerning the role of audit committees in SOEs, clarifications regarding the role of the state in selecting audit firms and, in a couple of countries, the introduction of aggregate reporting on the entire SOE portfolio. Almost all the reviewed countries have established SOE-specific disclosure and requirements and some form of performance evaluation system for SOEs, by developing performance contracts or performance indicators. The frequency of reporting often depends on the size and operations of a given company. In a sub-set of countries disclosure requirements are more stringent for SOEs based on additional guidance or requirements set out in applicable laws. For instance, Sweden and the United Kingdom have specific manuals for SOEs to follow for financial disclosure. In Sweden, the requirements are set out in the “Guidelines for External Reporting of SOEs” which, in addition to financial and non-financial disclosure also require that SOEs publish sustainability reports concerning all stakeholders. In the United Kingdom, this requirement is applicable to all public bodies as stipulated in the “Government Financial Reporting Manual” (OECD, 2020b).

National developments 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: 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;

II.

Adequacy of its social status to the legislative authorisation of its creation;

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;

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 55 IV.

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

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;

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;

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;

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;

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 privatelyheld enterprises.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

56  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.

Box 6.1. Disclosure and reporting obligations placed on SOEs in Italy with respect to board qualifications and selection processes The qualifications required for the candidates to the boards of directors/auditors are defined primarily in two specific acts, both issued by the Minister of the Economy and Finance. The first directive, issued in June 2013, provides the Department of Treasury with the general criteria for candidate qualifications and the guidelines to be observed in the selection process. The directive emphasizes also the “fit and proper” conditions essential for all the prospective administrators and sets the path for transparent and objective evaluation of personal prerequisites, with special attention to the role of a CEO in specific economic sectors. The second directive of the succeeding Minister, which in March 2017 integrated the previous act, specifies the procedures to use in the selection of the eligible individuals to be appointed by the State entity in charge of exercising shareholding rights.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 57 As a result, by the end of every January, the Department of the Treasury announces the positions in SOEs to be renewed and, with the support of specialised professionals in head hunting of managers, starts to arrange shortlists of potential candidates for each enterprise. The final step is the proposal of the names to the Minister of the Economy and Finance, accompanied by a brief report clarifying the profiles of the candidates, along with the description of the peculiarity of each position, as well as the existence of the mandatory conditions for the appointment. Sources: Questionnaire responses from Italian government authorities.

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 IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

58  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.

Table 6.1. Information disclosure practices in Latvia: Changes in the 2013-2018 period Information

Agent

Nature of Change

Company objectives and their fulfilment

SOE

Previously, only general objectives were occasionally published. Now, depending on the size of an SOE, quantitative financial and non-financial goals are published in addition to general objectives. Smaller SOEs do not publish such information on their websites publicly, but only reports them to the shareholder and CSCC. Large SOES publishes both enterprise strategic objectives and summary

State shareholder

. Previously, only general objectives were occasionally published. Now, depending on the size of an SOE, quantitative financial and non-financial goals are published in addition to general objectives. Smaller SOEs do not publish such information on their websites publicly, but only reports them to the shareholder and CSCC.

CSCC

Now, both company strategic objectives and summary/excerpt of financial and non-financial goals, including their fulfilment are published on the CSCC annual public report

SOE

Publishes financial and operating results of companies regardless of a shareholder

State shareholder

Publishes financial and operating results of companies regardless of a shareholder

Financial and operating results of companies

Governance, ownership and voting structure of the company

CSCC

The results are now available both on the CSCC interactive website and the CSCC annual public report.

SOE

Publishes information on both ownership and governance, but not on voting structure.

State shareholder

Remuneration of board members and key executives

Publishes information on ownership but not on governance and voting structure.

CSCC

Information on ownership is published on both the CSCC interactive website and the CSCC annual report. But the information on voting structure is not provided through these means.

SOE

No change. Like before, an aggregated information is available in the annual reports of SOEs.

State shareholder CSCC

The information is only available in the annual report of large and mediumsized SOEs. The information is obtained from the official statistical notification of the Central Statistical Bureau and is available on the CSCC website. The information is not available in the CSCC annual public report.

Source: Author and questionnaire responses from Latvian authorities.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 59 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 IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

60  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

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 61 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 nonfinancial 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

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

62  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.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 63

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en. Rubens Fontes Filho and Francisco Alves (2018), Control mechanisms in the corporate governance of state-owned enterprises (SOEs): A comparison between Brazil and Portugal, http://www.scielo.br/pdf/cebape/v16n1/en_1679-3951-cebape-16-01-1.pdf.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

64 

7. The responsibilities of the boards of state-owned enterprises

Boards play a central function in corporate governance and performance of state-owned enterprises (SOEs). The board has the ultimate responsibility, including through its fiduciary duty, for developing corporate strategies and overseeing SOE performance. In this capacity, the board acts fundamentally as an intermediary between the state as a shareholder the company and its executive management. This role is no less important in SOEs than in private companies. According to the OECD Guidelines on Corporate Governance of State-Owned Enterprises, the board should be charged with the duty to act in the interests of both of the state and the company. With the widespread commercialisation of SOEs in recent decades, governments have made efforts to professionalise boards of directors and to give boards greater power and autonomy. This chapter highlights national practices regarding the nomination, responsibilities, composition, training programmes, and evaluation of SOE boards of directors.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 65

Main trends According to the OECD Guidelines on Corporate Governance of State-Owned Enterprises (SOE Guidelines), an SOE board should constitute a “sufficient number of competent non-executive board members who are capable of independent judgment”. They should act with integrity and be held accountable for their actions. Two-thirds of the countries reviewed for this report have made notable efforts and progress in this regard over the past five years. However, while good practice calls for an SOE’s board to oversee and incentivise management, corporate boards in the reviewed countries are still often closely linked to state ministries, or are bypassed by the government on main board responsibilities such as appointment of CEOs. Frameworks for nominating and appointing board members and senior executives should arguably be made more transparent and consistent, since countries reported some cases of close ties between the senior executives and the political decision makers affecting decision process for appointment. Among the surveyed countries, Israel and Sweden have a comprehensive board nomination framework to empower SOE boards to appoint the chief executive officer, while other reviewed countries like Chile and Italy have aimed to do so to a certain extent. In Norway, the general manager is, according to the limited liability companies acts, appointed by the board unless it is stated in the Articles of Association that the authority to appoint the general manger belongs to the general meeting. Sweden specifies the board independence requirements for listed companies and the Norwegian government makes a clear commitment to empower the authority delegated to SOE boards and executive management. Estonia, Israel and Spain have introduced an SOE board evaluation system. In Israel, board members are evaluated by the chairman of the board, other members of the board, and by the board members themselves. In Estonia, under the Nomination Committee’s initiative, self-assessment of supervisory boards is required to take place in conjunction with the evaluation by the Nomination Committee. Continued or stronger emphasis on gender equality on SOE boards is noted in Finland, Germany, Israel, Italy, Korea, New Zealand, Spain, Sweden and the United Kingdom. Corporate governance arrangements of SOEs should further evolve so that respective roles of the ownership entity and SOE boards of directors in the relationship with executive management can be clarified and clearly delineated. Overcoming these challenges requires even-handed regulation, professional state ownership practices, independent boards of directors and monitoring SOE performance against clearly defined objectives, supported by high standards of disclosure and accountability. A key way to achieve these objectives is by implementing the OECD Guidelines.

National developments a) Changes in the roles of SOE boards of directors, as established in legislation or by relevant regulations or owner’s expectations In Argentina, since the issuance of the Presidential Decree 72 of 2018, audit institution, Sindico General de la Nacion (SIGEN) is empowered to appoint and remove the heads of the Internal Audit Units (Unidades de Auditoria Interna)– which together with SIGEN form the SOE internal control system in Argentina. In addition, the SIGEN reviews and approves the UAI’s functions and structure. In Belgium, the Act of December 2015 stipulates that the CEO is appointed by the Board and no longer by the government. All directors are appointed by shareholders at a shareholders’ meeting and the State has a right to propose candidates to the nomination committee pro rata its shareholdership. In Brazil, a majority of the responsibilities of the board of directors is established by Corporate Law No. 6,404/1976, with the exception of the need for evaluation and self-assessment of the members of the board

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

66  of directors. Under the SOE Governance Reform Law 13,303/2016 and the Decree 8,945/2016, the bodies responsible for appointing administrators and members of the boards of directors are required to ensure an independence of SOE boards and prepare a preliminary analysis of the requirements established by the new legislation before forwarding the process to the Eligibility Committees within an each SOE. These committees are responsible for giving their opinion on the nomination made for the positions under discussion in order to assist the board of directors and the general assembly in the decision-making. In Chile, in mid-2018, the ownership entity SEP approved a regulation for the appointment of board members in SEP SOEs. In Costa Rica, some past controversy as well as the 2018 fiscal reforms have generated greater awareness around the importance of strengthening SOE boards. Tracking board performance has also become one of the government’s priorities for SOE reform and has been formalised as one of the board’s responsibilities under Presidential Directive 099-MP, which requires the implementation of “an objective and structured annual performance evaluation programme”. Most SOEs have language in their statutes that permits the board to exercise its duties with full independence within the rules established by law, applicable regulations and the principles of procedure. However, the forthcoming OECD Review of Corporate Governance in Costa Rica suggests that as the government continues to promote the implementation of the above measures, it remains an important goal to underscore the need for objective and independent thinking amongst board members and the duty to act in the company’s interests (OECD, 2020a). In the Czech Republic, according to the 2014 Act on Business Corporations, a possible single body (Management Board) for corporate governance in the “monistic” model of joint-stock companies has powers over the board of directors and the supervisory board. The statutory director and chairman are elected by the management board. A state enterprise creates only a “dualistic” model—the multi-person supervisory board and one director. The supervisory board controls managing SOEs´ property and the director is responsible for managing SOEs. In Estonia, the self-assessment of supervisory boards has been implemented together with external evaluations by the Nomination Committee. So far it has been carried out twice, in2018 and 2019. The results and outcomes are discussed both by the nomination committee and also by supervisory boards to improve their performance and if necessary also make changes in the supervisory boards. In Israel, there was a positive change with regard to regular evaluation and self-evaluation by the boards and their individual members in the past five years. The government has introduced an SOE board evaluation system through which board members are evaluated by the chairman of the board, other members of the board and by the board member himself/herself. In order to evaluate a member of the board the evaluation is accompanied by the meetings, in which candidates’ strategic insight and board understanding are discussed. In 2018, the Government Companies Authority (GCA) also started to undertake efficiency assessment of SOE boards by external advisors. Each director is evaluated twice during the three year tenure– after the first year and towards the end of his/her tenure. One of the goals of the evaluation is that GCA will have data on the directors which will help it evaluate board efficiency in the SOE sector, horizontally and vertically. Another goal is to assess directors’ performance as a parameter in nomination decisions. This new evaluation policy complements the GCA’s provision for regular training sessions for newly appointed SOE board directors, which contribute to the government’s efforts to professionalise boards of directors of SOEs as a whole. Israel’s recent efforts to enhance transparency of its SOE board nomination processes are also elaborated in the box below.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 67

Box 7.1. Establishing a competitive public procedure for identifying professional candidates for SOE board members in Israel The Government Companies Agency (GCA), which is the Israeli state ownership co-ordinating agency launched "The Directors Team" initiative aimed to transform the SOE Supervisory Board members' nomination process by creating a competitive public procedure for identifying high quality SOE Board members. The program was launched in 2013 and has since been held in three rounds. Supervisory Board members from "The Directors Team" have been included on the boards of directors of multiple SOEs in the country. The directors are required to have an extensive experience in the business arena, be independent, and oversee a significant part of the SOE portfolio in the country to implement major reforms to better support the public policy objectives that they are pursuing. The previous round, launched in 2015, attracted a great deal of public attention and some 7 100 candidates applied to be included in "The Directors Team". After a close review consisting of scoring and rating, the list was reduced to about 1 000 candidates, who were interviewed and categorised by 6 different types of profiles: a senior management expert, a financial expert, a legal expert and a content expert (in the fields of security, infrastructures or social areas). The 500 candidates with the highest scores on the various profiles were included in the pool of 500 recommended Supervisory Board members by the GCA, out of which each minister can choose to nominate Board members for the SOEs he or she is responsible for. Once a candidate is nominated by a minister, the nomination has to be approved by a public committee, chaired by a retired judge. To date, over 200 have been appointed by the ministers to act as SOEs Board members. In cases when ministers choose to nominate a candidate outside of the GCA recommended pool, the candidate's compatibility is examined against the same standards of "The Directors Team" and his\her nomination has to be formally approved by a public committee. In addition, "The Directors Team" aims at maintaining high standards of candidates' diversity, with an equal gender representation and quotas for Arabs, new immigrants, ultraorthodox and disabled candidates. Source: National submission from Israeli authorities.

In Italy, Art. 12 of the Legislative Decree 175/2016 specifies that the board of directors/auditors is generally responsible for companies with public participations. The members of such bodies are subject to the jurisdictional action of responsibility on the basis of general corporate law, even if the power of investigation by the State Court of Auditors—for any pecuniary damages caused by its administrators in the so called “in house” SOEs—is also intact. In such cases, the board of directors has the power to dismiss a director in the event of a concluding sentence establishing that fraudulent behaviour caused damages to the company or in case of other misconduct related to the so-called ethical clauses. In order to simplify and reduce the functioning costs of corporate governance, Article 11 of the Legislative Decree 175/2016 states that the governing bodies of SOEs are, as a general rule, constituted of a sole administrator. This provision for a sole administrator in companies under public control represents one of the principal innovative features, in this field, of the Consolidated Act on public participated companies. However, under defined circumstances, the shareholders meeting of the SOE could choose not to adopt

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

68  this rule but the formal act must be assumed by a clear resolution, with regard to precise reasons for organisational adequacy and paying particular attention to the operating costs. In substitution of the sole director, with justified reasoning, the shareholders meeting can appoint a board of directors, composed of three or five members, or adopt forms of alternative governance. In addition, Article 11 has established that, in appointing directors to the boards of SOEs, public ownership entities must respect gender equality legislation, taking into account the total number of appointments already made. Usually, if the SOE is managed by a board of directors, the company bylaw states that the appointments have to be made in accordance with the principles established by Law 120/2011. In Latvia, with the adoption of the Law on Governance of Shares and the regulation of Cabinet of Ministers regarding the procedures for nomination of the members of the board and the council, the board nomination practices are publicly announced and the nomination committee includes participation from several stakeholders– the direct shareholder, CSCC, independent experts and, if necessary, observers with advisory rights to ensure the transparency of the assessment process. The independent experts in practice are representatives from the organisations representing employers, employees, corporate governance and the sector associations, chambers of commerce, institutions representing, non-governmental industry sectors, education and science sectors and institutions developing good corporate governance. Observers with advisory rights in practice are representatives from the recruitment companies, ministry representatives, members of the board and the council of the SOE. Above mentioned functions are set in the Law on Governance of Capital Shares of a Public Person and Capital Companies (see article No.107). According to latest amendments (2018) of the Law On Governance of Capital Shares of a Public Person and Capital Companies, the supervisory board or executive board member in SOE’s where State or Local Administration holds 100% solely or together is no liable for loses if he or she proves that he or she conducted as an honest and prudent person in good faith according to lawful decisions of higher decision making bodies of the particular SOE. In Poland, according to the Art. 18 of the Law of 16 December 2016 about the rules of state property management, an entity authorised to exercise rights from shares belonging to the State Treasury or a state legal person are obliged to undertake activities aimed at determining, by way of resolution of the general meeting of shareholders or in the company's statute, that members of the body are appointed and dismissed by the supervisory body after conducting the recruitment procedure, the purpose of which is to check and assess the qualifications of the candidates and select the best candidate for a member of the management body. An entity authorised to exercise rights over shares belonging to the State Treasury or a state legal person are obliged to take actions aimed at introducing the above mentioned requirement into the statutes of companies for which a company with the State Treasury or a state legal entity is a dominant entrepreneur. Art. 22 consists of requirements for a candidate for a member of the management body. In the Slovak Republic, in 2017 the Government adopted Decree No. 190/2017 which allowed separation the functions of chair of board of directors and CEO . The new Statutory Audit Act No. 423/2015 effective from 17 June 2016 has substantially strengthened the role of audit committees in public interest entities. Audit committees are required to monitor the effectiveness of internal control, internal audit and risk management systems if they have an impact on preparation of financial statements; monitor the process and results of the statutory audit of the individual and consolidated financial statements; and verify and monitor the independence of statutory auditor. In Spain, the board of directors are required to undertake an annual evaluation and adopt, when necessary, an action plan to correct weakness detected in: the quality and efficiency of the board´s operation; the performance and membership of its committees; and the diversity of board membership and competences. As for director remuneration, the principle is that it should be sufficient to attract individuals with the desired profile and compensate the commitment, abilities and responsibility that the post demands, but not so high as to compromise the independent judgement of non-executive directors.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 69 In Turkey, in 2013, along with the Cabinet Decree of General Investment and Financial Program of SOEs and Subsidiaries for 2014, all SOEs became subject to external audit besides state audit. In this regard, the board of directors of SOEs are included in all external audit proceedings.

b) Changes in the composition of boards of directors across the national SOE sector In Argentina, there is a tendency towards greater professionalisation of the board of directors, and establishing an equal relationship related to the shareholding of the State in each SOE through Law 19.550 for commercial companies including SOEs.1 In Brazil, the administrators of SOEs are required to meet the following mandatory requirements: 

Be a citizen of unimpaired reputation;



Have a well-known knowledge compatible with the position for which it was indicated;



Have academic training compatible with the position for which it was indicated; and



Have at least one of the professional experiences below:



o

Ten years in the public or private sector, in the area of activity of the state enterprise or in an area related to that for which they are appointed in function of superior management;

o

Four years in the position of Director, Board of Directors, member of audit committee or senior management in a company of size or social object similar to that of the state company, being understood as a position of superior management that situated in the two levels the company's highest non-statutory hierarchies;

o

Four years in a commission or equivalent function equivalent to level 4 or higher, of the GroupSenior Management and Advisory DAS, in a legal person under domestic public law;

o

Four years in the position of professor or researcher, of higher level in the area of performance of the state company; or

o

Four years as a liberal professional engaged in the area of activity of the state company.

o

The academic formation must contemplate undergraduate or postgraduate course recognised or accredited by the Ministry of Education.

Only natural persons may be elected to the position of administrator of SOEs. The Officers shall reside in the Brazil. It is forbidden to indicate to the Board of Directors and to the Board of Executive Officers: o

The representative of the regulatory body to which the state enterprise is subject;

o

Minister of State, Secretary of State and Municipal Secretary;

o

Holder of position in commission in the federal public administration, direct or indirect, without permanent bond with the public service;

o

Of statutory officer of political party and of mandate holder in the Legislative Power of any federative entity, although licensed;

o

Of consanguineous or related relatives up to the third degree of the persons mentioned in subsections I to IV;

o

A person who has acted in the last thirty-six months as a participant in the decision-making structure of a political party;

o

Person who has worked, in the last thirty-six months, in work linked to the organisation, structuring and execution of an electoral campaign;

o

Person holding a position in trade union organisation;

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

70  o

A natural person who has signed a contract or partnership, as supplier or buyer, applicant or offerer, of goods or services of any nature, with the Union, with the state company or with its state-owned conglomerate in the preceding three years the date of his appointment;

o

A person who has or may have any form of conflict of interest with the political-administrative person controlling the state enterprise or with the state company itself; and

o

A person who falls under any of the ineligibility hypotheses provided for in the items in item I of the caput of art. 1 of Complementary Law No. 64, of May 18, 1990.

The waiver of clause III of the caput applies to the server or retired public employee who holds a position in a commission of the federal public administration directly or indirectly. In Chile, there have been changes in the composition of boards in ENAP, a national oil company. On 27 July 27 2017, the Law 21.025 was enacted, which entered into force on 1 December 2017, modifying the corporate governance structure of ENAP by reducing the number of board members from 8 to 7 directors and removing the Minister of Energy from the board of directors of the company. Related to gender equality, since 2016 SEP has appoint at least 40% of women directors in SEP companies. Since the beginning of 2014 boards members of all SEP SOEs must declare any operations with related parties to the Shareholders meeting or to the SEP, without a threshold of minimum amount, which was the rule before. In Costa Rica, as a response to the OECD Working Party’s recommendations made as part of the country’s OECD accession process, the government has undertaken a number of initiatives to strengthen SOE board composition and practices. A Presidential Decree was passed to better define board member profiles and the roles and responsibilities of board members. In addition, public tenders for board members have been initiated for board appointments in 2019, and are expected to improve the skills available on boards. The government also initiated a comprehensive training programme for existing and prospective SOE board members, key executives and certain government officials with the goal of developing a better shared understanding of their roles and their decision-making authorities. Such training is expected to be an important contributor to professionalising boards and cultivating a more professional governance culture in SOEs (OECD, 2020a). In the Czech Republic, for companies with more than 500 employees, one third of the members of Supervisory boards are elected by all employees and two thirds are by the General meeting of joint-stock company. In Estonia, the government established a Nomination Committee in the Finance Ministry in 2017 with an objective to make competence-based choices for supervisory boards. Since the foundation of the committee, presence of representatives with experience in private sector in supervisory boards has significantly increased (See Table 7.1).

Table 7.1. Changes in the composition of SOE boards of directors in Estonia (%) 2018 Private sector Officials Experts with political background

2015

2012

2009

62

37.4

33

31

37.2

38.5

37

49

0.8

17.2

13

12.5

6.9

17

7.5

(1 person) Members of parliament

0

Source: National submission from Estonian authorities

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 71 In Finland, as of now, there is only one SOE (i.e. the national gambling company Veikkaus Ltd) out of 67 where there are active politicians (members of parliament) on the board of directors. Veikkaus Ltd’s board of directors comprises of eight members, and four of them are politicians. In France, Ordinance No. 2014-948 of 20 August 2014 on the governance and capital operations of public companies has reformed the rules concerning the composition and functioning of boards of directors and supervisory boards. The State appoints a representative on the boards of directors, the supervisory boards or the legislative bodies in lieu of the companies of which it holds directly, alone or jointly with its public institutions, more than half of the capital. It may also appoint a representative in the deliberative bodies of the other companies of which it alone directly holds more than 10% of the capital. The State may also, on its proposal or with its agreement, be appointed by the competent organisms as a member of the board of directors, the supervisory board or the deliberative body in lieu of the other companies in which the state or its public industrial or commercial establishments hold, directly or indirectly, a participation. The state then designates its representative. State representatives have the same powers and obligations as other board members, but the remuneration they receive for the exercise of their mandate is paid into the state budget. The order creates a category of "members designated by the competent organ of society". Concerning public institutions, Law 83-675 of 26 July 1983 on the democratisation of the public sector, amended by Law No. 2014-873 of 4 August 2014 for the real equality between women and men. Article 6 (1) states that "[t] he difference between the number of women and the number of men who are members of the administrative or supervisory board appointed by decree pursuant to paragraphs 1 and 2 of the Article 5 cannot be greater than one. In Germany, as of 1 March 2015 the Act on Equal Participation of Women and Men in Executive Positions in the Private and Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst) is in effect. The purpose of the law is to significantly raise the percentage of women in leadership positions in the private sector, the federal administration and regarding board seats to be nominated by the federal government. According to this Act, listed and fully codetermined companies shall have at least 30% female and 30% male members on their supervisory boards as of 1 January 2016 and shall also define target percentage ratios for women on their supervisory boards, executive boards and on the 2 top executive levels beneath the executive board. In Korea, the Article 24-2 was newly added to the “Act on the Management of Public Institutions” in 2018 to enhance gender equality for appointment of executive officers and board members. According to the Article, SOEs shall establish and strive for the implementation of annual anti-discrimination goals for executive appointments. CEOs of SOEs are required to submit to the Minister of Economy and Finance an annual report on progress with respect to establishment and implementation of such premises. The Presidential Decree stipulates the matters necessary for the establishment and execution of annual antidiscrimination goals. A new clause for enhancing transparency in the process for recommending and nominating CEOs and boards of directors of SOEs was added to the Act in 2016. Under the Clause, the Committee for recommending CEOs for SOEs is required to keep minutes of each meeting and make them available for public inspection unless the case is judged to be exceptional according to the Official Information Disclosure Act. Also, the Committee is mandated to provide for eligibility criteria for CEOs taking into account specialities and requirements of the corresponding corporation or institution. In Latvia, supervisory boards where established in all SOEs which qualify as “large” starting from 2016. According to Regulations of Cabinet of Ministers of Republic of Latvia 1 December 2015 No. 686 which sets nomination order for board members in enterprises where state has rights to propose candidates for board member positions, in solely owned SOEs at least half of supervisory board members must be independent members or if supervisory council is composed of odd number of members then number of independent members may be less by one in comparison to other members of supervisory board. All SOEs fulfil the criteria, and in most cases supervisory councils are composed mostly of independent members. IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

72  There is only one exception– the Development Finance Institution ALTUM. ALTUM’s supervisory council composition is regulated by “Law on Finance Development Institution” According to the regulation, an independent board member should not be subjected to particular SOE’s state capital share holder representative’s orders; was not an executive board member in the last three years or a company controller in particular SOE or in SOE daughter company; earns income in particular SOE only for the performance of the duties of a supervisory board member; in the last three years was not an external auditor, capital shareholder or executive board member or employee in external audit company of particular SOE. All SOE (where state ownership is more than 50%) board members are still subject of the Law On Prevention of Conflict of Interest in Activities of Public Officials. No specific regulations concerning gender equality or inclusiveness. Discrimination on any grounds is forbidden by Constitution. Professional requirements equally are applicable to all candidates without exceptions. Professional criteria are approved by nomination commission of particular nomination process taking into account SOE operating area, financial performance, medium term targets and other relevant factors. In Lithuania, as of now, there are no politicians serving on SOE boards or supervisory boards and 56% of boards members are independent. The number of politicians decreased in period of 2015-2017 after in the Government Resolution No. 631 prohibition for politicians to be appointed or selected to SOE boards/supervisory board was established. Independent candidate to the board or supervisory board must meet general, specific (settled by the authority representing the state) and independence requirements. The candidate must meet the general requirements such as higher university education; not deprived and not restricted right to hold the respective position for which the candidate applies and fulfil the functions attributed to such position; and not disqualified from office at a single-person or collegial body of the legal entity during the last five years. At the same time, the candidate should not hold the shares of the SOE or municipality-owned enterprise of an affiliated company thereof by the right of ownership or the person who is a representative of such shareholder. The candidate also must meet the following independence criteria: When filing an application for participation in selection and before expiry of the selection procedures the candidate cannot be the manager of the SOE or municipality-owned enterprise to which he applied or an affiliated company thereof Must not have held such position for the last three years and an employee of the SOE or municipalityowned enterprise to which he applies and an affiliated company thereof Must not have held such office for the last three years and the candidate must not receive and during the last three years must not have received any remuneration from such SOE or municipality-owned enterprise to which he applies and an affiliated company thereof, except for remuneration for the duties of the member of a collegial body. The candidate must not own the shares of the SOE or municipality-owned enterprise to which he applies or an affiliated enterprise thereof and cannot be a representative of such shareholder. According to the Government Resolution No. 631 the “conflict of interest” shall mean the situation where a member of a board of SOE or municipality-owned enterprise fulfilling his duties or an assignment must take a decision (or participate in adoption thereof) or fulfil an assignment related to his private interests. The candidate must to submit a declaration, that his participation in the selection procedure of candidates does not result a conflict of interest. In Poland, there were no fundamental changes in most cases with the exception of typical changes of a personal nature. The regulations regarding the qualifications of board members have changed - the Art. 22 of the Law of 16 December 2016 about the rules of state property management contains requirements for a candidate for a member of the management body. An entity authorised to exercise rights from shares belonging to the State Treasury or a state legal person in the scope of exercising rights from shares in the

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 73 company are obliged to undertake activities aimed at determining, by way of a resolution of the general the assembly or the statutes of that company, requirements to be met by a candidate for a member of the management body, taking into account in particular that he is a member of the management body of the company may be a person who meets all the following conditions: 

Has a university degree or university degree obtained abroad recognised in the Republic of Poland;



Has at least a 5-year employment period based on a contract of employment, appointment, selection, appointment, cooperative employment contract, or provision of services under a different contract or business activity on its own account,



Has at least 3 years of experience in managerial or independent positions or resulting from running a business on its own account,



Meets other requirements specified in separate regulations, in particular, do not violate restrictions or prohibitions on the position of a member of the management body in commercial companies;



A member of the management body cannot be a person who meets at least one of the following conditions:



Acts as a social associate or is employed in a deputy, senatorial, deputies and senatorial office or an office of a Member of the European Parliament under a contract of employment or provides work on the basis of a contract of mandate or other agreement of a similar nature;



Is part of the body of a political party representing an external political party and authorised to incur liabilities;



Is employed by a political party on the basis of a contract of employment or provides work on the basis of a contract of mandate or another contract of a similar nature;



Performs a function of choice in the company's trade union organisation or in the company's trade union organisation from the capital group;



Its social or commercial activity raises a conflict of interest regarding the company's operations

Spain has increased its commitment to enhance gender equality in SOE boards. In January 2020, Spanish National Securities Market Commission (CNMV) put in place a new legal obligation to give 40% (formerly 30 percent) of board seats of listed SOEs to women. The new requirement also applies to non-listed public companies. In Switzerland, in 2013, the Federal Council decided on guidelines for the representation of the national languages and the sexes on boards (German 65.5%, French 22.8%, Italian 8.4%, Rhaeto-Romanic 0.6%. At least 30% males and females on the boards). The ownership entities have to state the measures taken and to be taken, if they fail to meet the requirements for gender and language regional representation. In 2015, a model requirement profile for board members was published2. It defines the requirement for the board as a body, for the individual board members and for the president of the board.

c) Changes in the extent to which SOEs have established specialised committees to support the board of directors In Argentina, the Audit Committees propose to modify the regulations with an aim of achieving more consensus every time. In Brazil, there was an obligation to create a statutory audit committee and an eligibility committee for all state-owned enterprises. It is incumbent upon the statutory audit committee, without prejudice to other powers provided for in the statute of the public company or mixed-capital company to: 

Give an opinion on the hiring and dismissal of an independent auditor;

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

74  

Supervise the activities of independent auditors, evaluating their independence, the quality of the services rendered and the adequacy of such services to the needs of the public company or of the joint stock company;



Supervise the activities carried out in the areas of internal control, internal audit and preparation of the financial statements of the public company or mixed-capital company;



Monitor the quality and integrity of the internal control mechanisms, the financial statements and the information and measurements disclosed by the public company or the joint stock company;



Evaluate and monitor risk exposures of the public company or mixed-capital company, and may require, among other things, detailed information on policies and procedures relating to: o

Remuneration of the administration;

o

Use of assets of the public company or mixed-capital company;

o

Expenditure incurred on behalf of the public undertaking or mixed-capital company;



Evaluate and monitor, in conjunction with the management and the internal audit area, the adequacy of transactions with related parties;



Prepare an annual report with information on the activities, results, conclusions and recommendations of the Statutory Audit Committee, recording, if any, significant differences between management, independent auditors and Statutory Audit Committee in relation to the financial statements;



Evaluate the reasonableness of the parameters on which the actuarial calculations are based, as well as the actuarial result of the pension plans maintained by the pension fund, when the public company or the mixed-capital company is a sponsor of a closed private pension entity.

The eligibility committee, in relation to the board of directors, is responsible for providing methodological and procedural support to evaluate the directors of state-owned companies. In Chile, the law that modified the governance structure of ENAP also includes the obligation to create a committee of directors with the powers and duties to examine external audit reports, balance sheets and other financial statements and to propose the names of external auditors to the board of directors, among others. The government of the Czech Republic established a nomination committee in 2014 to undertake an advisory role. Proposal of new members of the board of directors and of the supervisory board in the “dualistic” model and the proposal of new members of the management board in “monistic” model of corporate governance must be published on SOEs’ websites according to the Act on Business Corporations. In France, there has been no regulatory change specific to SOEs. Pursuant to Article L823-19 of the French Commercial Code, as amended by Order No. 2016-315 of 17 March 2016 on the Statutory Auditors, "in public-interest entities within the meaning of Article L. 820-1 and financing companies within the meaning of Article L. 511-1 II of the Monetary and Financial Code, a specialised committee acting under the responsibility, as the case may be, of the body responsible for the administration or supervisory body, monitors matters relating to the preparation and control of accounting and financial information." Therefore, this obligation is to set up an audit committee for certain public companies, particularly in the banking and insurance sector. For public companies that have adhered to the AFEP-MEDEF code, §14 of this code states that "the number and structure of committees depends on each board. However, in addition to the duties assigned by law to the audit committee, it is recommended that the remuneration, as well as the appointments of directors and executive corporate officers, be the subject of preparatory work carried out by a specialised committee of the board of administration." In Hungary, in 2016, Audit Committees were established in some SOEs to monitor the effectiveness of the internal quality control and risk management systems and financial reporting process and submit recommendations or proposals to the board of directors and the supervisory board where deemed necessary.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 75 In Lithuania, as the Law on Audit of the Financial Statements provides that large SOEs are obliged to have audit committees the government in 2017 adopted rules regarding composition of audit committees. The rules require that members should have collegial knowledge in finance, accounting and the relevant commercial sector. More than half of the audit committee’s members are required to be independent and meet the provided independence criteria. The rules also contain restrictions designated to avoid conflicts of interests. In Spain, companies including SOEs are required to maintain a risk control and management function in charge of an internal unit or department, supervised directly by the audit committee or, where appropriate, another dedicated board committee.

References OECD (2020a), Corporate Governance in Costa Rica, OECD Publishing, Paris, forthcoming. OECD (2020b), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, Paris, forthcoming. OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, http://www.oecd.org/corporate/ca/Ownership-and-Governance-of-State-OwnedEnterprises-A-Compendium-of-National-Practices.pdf OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en. Rubens Fontes Filho and Francisco Alves (2018), Control mechanisms in the corporate governance of state-owned enterprises (SOEs): A comparison between Brazil and Portugal, http://www.scielo.br/pdf/cebape/v16n1/en_1679-3951-cebape-16-01-1.pdf.

Notes 1

See: http://servicios.infoleg.gob.ar/infolegInternet/anexos/25000-29999/25553/texact.htm

2

https://www.efv.admin.ch/efv/fr/home/themen/finanzpolitik_grundlagen/cgov/leitungsorgane.html

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 77

Annex A. OECD questionnaire for the progress report on changes in national SOE ownership and governance practices over the last five years (2013-2018 period)

Your government is invited to contribute to a stocktaking of recent changes in SOE governance by filling out the below questionnaire.

Background This questionnaire has been prepared by the OECD Secretariat for the progress stock-taking report as part of the “Implementing the SOE Guidelines” project to be completed by the year 2020. On 15 November 2018, delegates of the 31st Working Party on State Ownership and Privatisation Practices agreed to undertake a questionnaire-based exercise which aims at stocktaking and assessing what have been the changes in state ownership and SOE governance in OECD member and partner countries since the work toward revising OECD Guidelines on Corporate Governance of State-owned Enterprises (the starting point was in 2013, leading to the Council adoption of the 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises) commenced. Responses to the questionnaire will be compiled into a substantive progress report shedding light on progress and changes regarding national practices with regard to each chapter of the SOE Guidelines. An initial submission including the questionnaire-based report of any progress, guidance and best practice in areas covered by the SOE Guidelines will be presented to Delegates for review and consideration at the next meeting of the Working Party on 11-12 March 2019. Work toward a final report will continue following the meeting and could be considered again at the meeting in October. The end product will take as a starting point key elements of the OECD publications entitled Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005 (2011) and Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices (2018), which demonstrated changes in national legal and regulatory frameworks, exercise of the ownership function and SOE governance since the SOE Guidelines’ inception. The questionnaire is addressed to state-owned enterprise (SOE) ownership entities, in addition to departments of government (e.g. ministries of finance and/or industry) with broader responsibility for the enterprises. Each section comprises a set of broad questions, where respondents are invited to highlight related recent reform experiences and challenges in detail. Respondents are encouraged to provide additional information and background documentation where available.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

78 

I. Rationales for state ownership In case there have been no significant changes in this area in the past 5 years, please check “none”  and go to the next item number II. 1. Does your government have an explicit ownership policy defining the overall objectives of state ownership? If yes, have there been changes to this policy? Please consider the following areas of possible change: 

How the ownership policy is determined (e.g. through legislation; cabinet decision; government decree). How often, if at all, it is reviewed and updated.



Specific legislation or guidelines that define how state-owned enterprises should be managed or controlled.



The main purpose(s) of state ownership offered as part of the ownership policy.



Supplementary or specific objectives or classifications for individual (groups of) state-owned enterprises.

2. If the answer to question 1 is no (or if certain categories of SOEs operate in a different legal and regulatory environment), have there been SOE-relevant changes in other applicable laws and regulations, such as general corporate law, laws pertaining to SOEs or company-specific acts of parliament, fiscal bills, or more general “expectations” communicated by the ownership function? If yes, please provide details. 3. If the answers to questions 1 and 2 are no, have there been other changes in rules determining under which circumstances SOEs may be created or ownership terminated? If yes, please provide details. 4. Have there been material changes in the financial and non-financial objectives of individual SOEs? If yes, please describe the reasons behind and the nature of the changes.

II. The state’s role as an owner In case there have been no significant changes in this area in the past 5 years, please check “none”  and go to the next item number III. 5. Please briefly describe any changes in the institutional arrangements for the exercise of the state ownership function. In particular changes in the following areas: 

The institution(s) (agency, ministry, specialised unit, etc.) that are responsible for exercising state ownership rights in SOEs.



The laws, policies and regulations guiding the operations of these institutions.



The relationship (institutional, political or otherwise) between ownership entities and other parts of the government sector.



Accountability of the ownership entity to relative representative bodies.

6. Have the legal forms of incorporation of SOEs changed? If so, please provide details. 7. Have there been material changes in the way the state exercises its role as an active and informed enterprise owner? In particular, changes in: 

Board nomination practices.



The setting and monitoring of objectives and mandates for individual SOEs.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 79 

Reporting systems to monitor, audit and assess SOE performance and compliance with governance standards;



Disclosure requirements for SOEs, including public disclosure.



Dialogue with external auditors and state control organs.



Remuneration policies for SOE boards and executive management.

III. State-owned enterprises in the marketplace In case there have been no policy changes in this area in the past 5 years, please check “none”  and go to the next item number IV. 8. Have the authorities in your country expressed a commitment (or changed an existent commitment) to address aspects or elements of competitive neutrality in the presence of government-controlled businesses? If yes, please provide details. 9. If there is a commitment to competitive neutrality, have the rules or institutions involved in enforcing this commitment changed? If yes, please provide details. 10. Respondents are encouraged to consider and report any changes pertaining to the following areas of competitive neutrality: 

Structural separation of SOEs’ public policy objectives from their actions in competitive markets.



Costing and accounting for commercial and non-commercial activities in the SOEs.



Requirements regarding SOEs’ rates of return, operating margins and other financial performance metrics.



Differences in taxation of SOEs, and their operations in the marketplace, relative to other enterprises.



Differences in regulatory treatment of SOEs and other enterprises.



Differences in access to financing between SOEs and other enterprises.



Public procurement rules affecting procurement by SOEs and SOEs’ role as suppliers to other public sector institutions.

IV. Equitable treatment of shareholders and other investors In case there have been no policy changes in this area for the past 5 years, please click “none”  and go to the next item number V. 11. Have there been changes in the implementation of the G20 OECD Principles of Corporate Governance that directly affect SOEs? This could include, but is not limited to: 

Ensuring that all shareholders are treated equitably.



Rules guiding transparency and disclosure of information to shareholders.



Policies with regards to communication and consultation with shareholders.



Facilitating the participation of minority shareholders in shareholder meetings.



Ensuring market-consistency in transactions between SOEs and the state.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

80  12. Have national corporate governance codes (or SOE-specific codes where applicable) changed and, if so, are SOEs wholly or partly subject to these codes? 13. Have the rules guiding SOEs’ involvement in co-operative projects such as joint ventures and public-private partnership changed?

V. Stakeholder relations and responsible business In case there have been no policy changes in this area for the past 5 years, please click “none”  and go to the next item number VI. 14. Have there been changes in the state’s general approach to stakeholders’ rights established by law or through mutual agreements? If so, please provide details. Also please describe any changes in reporting requirements with regards to stakeholder relationships. 15. Are there new requirements with regard to SOE board obligations to establishing internal controls, ethics and compliance programmes or measures? 16. Please describe any changes in government policies, requirements and expectations regarding responsible business conduct (RBC) in SOEs. Please also describe any changes in the way the government’s expectations regarding RBC are communicated to SOEs and enforced. 17. Have there been changes in the rules or national practices bearing on SOEs’ role vis-à-vis the political system, including campaign contributions, sponsorship and lobbying? If so, please provide details.

VI. Disclosure and transparency In case there have been no policy changes in this area in the past 5 years, please click “none”  and go to the next item number VII. 18. Please describe any changes in the overall disclosure and reporting obligations placed on individual SOEs. This may include, but is not limited to: 

Enterprise objectives and their fulfilment.



Enterprise financial and operating results.



Governance, ownership and voting structure of the enterprise.



Remuneration of board members and key executives.



Board qualifications and selection processes.



Material foreseeable risk factors.



Financial guarantees.



Material transactions with related entities.



Relevant issues relating to employees or other stakeholders.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

 81 19. Have there been changes to the rules and practices bearing on external auditing of SOE financial statements. Have there been changes in the roles assigned to independent auditors and the state audit/control functions? If yes, please provide details. 20. Have there been changes in aggregate annual reporting by the state about its SOE portfolio? This could include the inception (or cessation) of aggregate reporting; changes in the coverage of reporting (i.e. which SOEs are included) and its public availability; and changes in the types of data and qualitative information included in the reports.

VII. The responsibilities of the boards of state-owned enterprises In case there have been no policy changes in this area in the past 5 years, please click “none”  21. Have there been changes in the roles of SOE boards of directors, as established in legislation or by relevant regulations or owner’s expectations? This could include, but is not limited to: 

The board’s powers to appoint/dismiss senior executive management.



The boards’ powers to set corporate strategy and supervise management.



The boards’ powers to oversee internal and external auditing procedures.



Regular evaluation/self-evaluation by the boards and their individual members.



The reporting lines between the internal audit function and the board (and/or relevant committee or equivalent)

22. Have there been changes in the composition of boards of directors across the national SOE sector? In particular, have there been a change in the number of active politicians in SOE boards? Also please provide information about any changes in the balance between independent directors and state representatives (including any new rules or guidelines in this respect); the professional qualifications of directors; avoidance of conflicts of interest; and gender equality and inclusiveness. 23. Have there been changes in the extent to which SOEs have established specialised committees to support the board of directors? If so, please provide details regarding the remits of the committees and the number and sectors of operation of the SOEs that have enacted the changes.

IMPLEMENTING THE OECD GUIDELINES ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES © OECD 2020

Implementing the OECD Guidelines on Corporate Governance of State‑Owned Enterprises: Review of Recent Developments The OECD Guidelines on Corporate Governance of State‑Owned Enterprises have provided an internationally agreed benchmark to help governments assess and improve the way they exercise their ownership functions since 2005. This report documents changes in state ownership and SOE governance in both OECD and partner economies and assesses the extent to which the Guidelines have served as a “roadmap for reform” in individual countries since 2015, following the most recent update of the Guidelines. Drawing on practices in up to 31 jurisdictions, it covers organising the state enterprise ownership function; safeguarding a level playing field between SOEs and private businesses; equitable treatment of shareholders and other investors; stakeholder relations and responsible business; transparency and disclosure practices; and professionalising boards of directors. The report supports policy makers by facilitating greater awareness and more effective implementation of the Guidelines.

Consult this publication on line at https://doi.org/10.1787/4caa0c3b-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.

ISBN 978-92-64-99539-0

9HSTCQE*jjfdja+