​To assist governments in the oversight of their state-owned enterprises (SOEs), the OECD has developed Guidelines on Corporate Governance of State-Owned Enterprises (OECD 2015). The Guidelines represent current global best practice for the oversight and management of SOE. This is the second in a two-month series devoted to a summary of the seven guidelines and why they are so important. Last month’s post summarized the first three Guidelines (and can be seen here), while this post summarizes the remaining four. Many of the practices have been foundational in reform efforts undertaken by ADB in Uzbekistan, Georgia and most recently, Palau.

​4.Treat Shareholders and Other Investors Equitably. When SOEs include non-state investors among their owners, the state and enterprises should recognize and promote the rights of all shareholders. The state should strive toward full implementation of all relevant sections of the OECD Principles of Corporate Governance whether or not it is the sole owner of the SOE. Shareholder protection includes ensuring all shareholders are treated equitably; observing a high degree of transparency; developing an active policy of communication and consultation with shareholders; facilitating participation of minority shareholders in meetings; finally, transactions between the state and SOEs should happen on market-consistent terms. National corporate governance codes should be adhered to by all listed SOEs and, where practical, unlisted SOEs. Adequate information should be available to non-state shareholders at all times. When SOEs engage in joint projects, the contracting party should ensure that contractual agreements are upheld, and disputes are addressed in a fair and timely manner. This rule exists to encourage states to be fully observant of the way they treat their shareholders. The state’s reputation in this aspect is integral to the ability of the SOE’ to attract outside funding and maintain an efficient, low-cost enterprise. 

In many emerging economies the electricity sector remains characterized by integrated monopolies, that are state owned. These state-owned-enterprises (SOEs) frequently own and operate all aspects of the generation, transmission, and distribution of electricity. (An SOE is a corporate entity, recognized by national law, in which the state exercises full or partial ownership.) Aside from the power sector, SOEs are often a government’s preferred structure for other utilities and infrastructure industries such as water, transport, telecommunication, and sometimes finance. Frequently, SOEs play a substantial role in the GDP and employment of national economies.
 
Good governance of SOEs is therefore vital to ensuring that their contributions to economic efficiency and competitiveness remain positive. In this vein, the OECD has developed their Guidelines on Corporate Governance of State-Owned Enterprises.[1] The Guidelines represent current global best practice for the oversight and management of SOE. This two-month series is devoted to a summary of the seven guidelines and why they are so important. Three are summarized this month and the remaining four next month. Many of the practices discussed below have been foundational in reform efforts undertaken by projects on which I have recently worked, including Uzbekistan, Georgia, Palau, Eswatini and Lesotho.