Monitoring Public Ownership

1. Monitoring Public Ownership Performance Measurement Corporate Governance Basel El Hini Senior Advisor to the Minister of Finance, Egypt

2. Monitoring Public Ownership OECD IFC WB EIOD EU ADB • All agree with OECD guidelines • The state should exercise its ownership functions through a • centralized ownership entity, or effectively coordinated entities. • The state acting as owner.

3. Means Observation / Supervision 2 Ways Performance Measurement Monitoring Public Ownership Most Effective Way Performance Measurement

4. Performance Measurement Performance Measurement Profit Measurement # Only Performance Measurement • Measuring • Financial Indicators • Non-Financial Indicators = But

5. Monitor Evaluate You Can’t Manage What You Can’t Measure Develop Enhance Change

6. Performance MeasurementSystems ِActivity-Based Costing 1 Economic Value Added 2 Quality Management 3 Customer Value Analysis 4 Balanced Scorecard 5

7. Balanced Scorecard ►One of the most widely adopted performance system used by governments to monitor SOEs. ►Provides a balanced measure between: • Financial Indicators And Non-Financial Indicators. • Transition, Short And Long Term Objectives. • Quantitative And Qualitative Data.

8. Balanced Scorecard Frame Work Companies Predefined Strategies Translate To a Balanced Group Of Interrelated Objectives Distributed On Number Of Measurable Perspectives

9. Balanced Scorecard Frame Work Design Implement Strategic Goals Perspectives Objectives Measures Strategic Goals Perspectives Objectives Measures Balance

10. Balanced Scorecard Frame Work Financial Perspective How do shareholders look at the company? How can we succeed financially? Internal Process Perspective Customer Perspective Balanced Perspective What must we excel at to satisfy shareholders and customers? How do customers see us? How can we serve customers to achieve financial goals? Learning & Growth Perspective How can we improve? What can we do to develop workers to achieve goals?

11. Balanced Scorecard Example Strategic Goals Achieve Social Objectives Maximize Shareholders Value Customers Financial 40% 20% • Increase customer • satisfaction. • -Improve market • performance. • -Acquire new • customers • Maximize cash • flow. • -Increase • profitability. • -Inc. financial • Contribution to society. 20% 10% 10% 5% Balance 10% 5% Learning & Growth 20% Internal process 20% • Improve project • cycle. • -Improve safety • indicators • -Improve innovation in • products & services. • Improve employee • Productivity. • -Improve training • investment. • -Improve employee • motivation. 10% 10% 5% 5% 5% 5%

12. Monitoring Public Ownership Initiative In Egypt

13. Monitoring Public Ownership Initiative In Egypt Objective Phases

14. Monitoring Public Ownership Initiative In Egypt Objective The State Acting As Owner

15. Monitoring Public Ownership Initiative In Egypt Phases First Phase Second Phase Creation OF A Performance Measurement System (Includes Designing A CGRI) Review Organization Of The Ownership Function Within The State Administration Of OECD & Non-OECD Countries.

16. Monitoring Public Ownership Initiative In Egypt Project Phases First Phase Create A Performance Measurement System Egyptian Balanced Scorecard

17. Egyptian Balanced Scorecard Government’s long term strategic objectives and goals for its SOEs Translate Into Financial Objectives And Measures Customers Objectives And Measures Internal Process Objectives And Measures Learning & Growth Objectives And Measures Assign Weighting to each objective & measure Result Creation of Egyptian balanced scorecard

18. Egyptian Balanced Scorecard Strategic Goals Goal 1 Goal 2 Customers Financial % % % % % % % Balance % Learning & Growth 20% Internal process % Corporate Governance (ECGRI) % % % % 5 %

19. Egyptian Corporate Governance Rating Index

20. Corporate Governance Rating Index CG Development CGRI Objective

21. Egyptian Corporate Governance Rating Index Principal Sources Egyptian Laws Law 203 Law 97 Law 61 OECD Guidelines On CG For SOEs Egyptian Code Of CG For Public Enterprises Sector

22. Egyptian Corporate Governance Rating Index Design ECGRI CG Principles Focus on Internal Process Perspective Component in Balanced Scorecard

23. Egyptian Corporate Governance Rating Index Design Yes/No Questions Quantitatively ECGRI Measures Weighted Scoring Level of CG Compliance For Pilot SOEs

24. Egyptian Corporate Governance Rating Index Advantages Egyptian CGRI Diagnostic & Educational Tool For Management Good CGRI System Good Governance Best Results For Shareholders

25. Egyptian Corporate Governance Rating Index Structure Scoring Categories NO Of Questions CGRI Points 1-Board Structure And Policies 2-Audit 3-Financial Disclosure And transparency. 4-Stakeholders Relations. 5-Executive Governance Provisions. 10 20 5 20 10 20 5 20 10 20 Total 40 100

26. Egyptian Corporate Governance Rating Index Results Establish CG bench mark for SOEs • Government • Policy Makers • SOE Boards • SOE Management Identify trends/gaps/ areas need strengthening in SOEs performance. Enables To Take corrective actions To conduct business of the company in line with owners wishes Provides incentives to management Effective CGRI System Enables owners To hold management accountable

27. Monitoring Public Ownership Initiative In Egypt Project Phases Second Phase Review Organization of The Ownership Function Within The State Administration Of OECD & Non-OECD Countries 1 Review different models adopted by OECD countries 2 Analysis of pro’s and con’s relating them to what is revealed on the status quo in Egypt. 3 Suggested action plan for the Egyptian Government to select a model for exercising ownership function.