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Corporate Governance

Corporate Governance. Corporate Governance in State-Owned Enterprises: Specific Problems & Possible Solutions by Nicole Beha, Marius Linkohr, Kristof Müller. Contents. Definition SOEs Specific problems Solution strategies Recommendations & Conclusion. Definition.

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Corporate Governance

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  1. Corporate Governance Corporate Governance in State-Owned Enterprises: Specific Problems & Possible Solutions by Nicole Beha, Marius Linkohr, Kristof Müller

  2. Contents • Definition • SOEs • Specific problems • Solution strategies • Recommendations & Conclusion

  3. Definition „The term State-Owned Enterprise (SOE) refers to enterprises where the state has significant control, through full, majority or significant minority ownership.“ (OECD 2005)

  4. State-Owned Enterprises • natural monopolies (e.g. railroads, postal services, prison facilities) • „public goods“ (e.g. health, education) • BUT: - poor performances - inefficiences  Corporate Governance structures

  5. Specific Problems of SOEs • agency problem • bureaucrats as managers • double principal-agent problem • non-business interests • ressource transfers

  6. Specific Problems of SOEs • absence of market mechanisms • no threat of takeover or bankruptcy • monopolies • capital / investment raising situation • special role: government as regulator and owner • performance measurement

  7. Solution Strategies • Corporatization • adoption of private-sector structures, such as single legal entity for the firm and/or independent managers • first step towards privatization  not all private structures can be used

  8. Solution Strategies • incentives framework • performance contracts  how is „performance“ measured? • monitoring and control / Board of Directors  shareholders‘ interests; absence of market mechanisms

  9. Recommendations & Conclusion • setting clear objectives & ranking them by priority • insulating SOEs from political & bureaucratic influence • independence of the Board of Directors • transparency of the SOE

  10. Questions or Comments? Thank you for your attention!

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