CORPORATE GOVERNANCE

AND INTEGRITY

IN STATE-OWNED ENTERPRISES

Represents the views of the presenter: Alison McMeekin

Policy Analyst

Corporate Governance and Corporate Finance Division,

OECD Directorate for Financial and Enterprise Affairs

2

SOEs in the marketplace and the need for

corporate governance

What we know: SOEs and the challenge of

corruption

Discussion and Q&A

What the state can do:

‘the ACI Guidelines’

3

SOEs in the marketplace and the need for

corporate governance

An important part of the global economy

4

Concentrated in network industries

and the financial sector (OECD

countries)

Largest portfolios in emerging

markets and post-transition

economies

Active internationally Governments becoming

important shareholders in

listed companies

20%

OECD Guidelines on Corporate

Governance of State-Owned Enterprises

6

What we know: SOEs and the challenge of corruption

What do we know? That it’s a problem…

7

27% of all foreign bribes of public officials between 1999

and 2014 involved SOE officials

42% of respondents witnessed corrupt and other irregular

risks materialise in the last 3 years

47% companies sustained financial losses

40% of complaints were related to corruption or other

irregular practices

8

…That certain sectors may be high risk

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Banking and related financial services

Information and Communication Technology (ICT)

Agriculture and Fishing

Transportation and Logistics

Energy (i.e. electricity generation and supply)

Postal

Mining

Oil and Gas

Yes

I don't know

No

… That all levels of the corporate hierarchy

can be involved

Who reportedly

witnessed corruption or

irregular practices?

• 43% of Board members

• 45% of heads of

corporate audit,

compliance or legal

functions

• 36% of Executive

Management

9

…That risks are exogenous and endogenous

10

A

B

C

DE

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

VW

X

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4

A- (Receiving) bribes

B- Falsification and/or misrepresentation of company documents, or false accounting

C- Fraud

D- (Offering) bribes

E- Money laundering

F- Anti-competitive, anti-trust activities or collusive activities

G- Illegal information brokering

H- Violations of data protection and privacy

I- Procurement/contract violations (delivering sub-par goods/services, violating contract terms with suppliers)

J- Violations of regulations (health and safety, environmental)

K- Interference in decision-making

L- Lying to employees, customers, vendors or the public M- Interference in appointments of board members or CEO

N- Non-declaration of conflict of interest

O- (Receiving) kickbacks and/or inappropriate gifts

P- Influence peddling

Q- Trading in influence

R- Making political party donations

S- (Offering) kickbacks and/or inappropriate gifts

T- Favouritism (nepotism, cronyism and patronage)

U- Abusive or intimidating behaviour towards employees

V- Retaliation against someone who has reported misconduct

W- Violations of Intellectual Property Rights

X- Stealing or theft of goods from your company

Do we know why? (1/2)

SOEs may be less responsive to corruption risk than private companies

Slightly higher perception that corruption risks will materialise in

companies with mixed objectives, as opposed to those with entirely

commercial objectives

Do we know why? (2/2)

Action SOEsNon

SOEs

Respondents said their companies have ceased business

operations in a particular jurisdiction because of the integrity or

corruption risks involved

12% 39%

Respondents that said their companies have taken internal

remedial/disciplinary action following violation of your

organisation's integrity or anti-corruption policies.

46% 70%

Respondents said their companies have substantially revised at

least one business project because of the corruption and

integrity risk(s) involved.

30% 66%

Respondents that said their companies severed a relationship

with at least one business partner (e.g. supplier, service

provider) because of the risk of exposure to or engaging in

corruption.

32% 66%

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Impressions? Questions?

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What the state can do:

Guidelines on Anti-Corruption and Integrity

in SOEs (2019)

I. Integrity of the state

Applying high standards of conduct to the state

Obstacle #1 – lack of integrity of political or public sector

Establishing ownership arrangements that are conducive to integrity

Government

• Sets ownership policy

• Coordinates at cabinet level

Ownership function

• Defines objectives for individual SOEs

• Monitors performance

SOE board

• Approves strategy

• Monitors management

Management

• Runs the company

Independent

regulation

II. Exercise of State Ownership for Integrity

Ensuring clarity in the legal and regulatory framework and in the

State’s expectations

Acting as an informed and active owner with regards to integrity

in state-owned enterprises

III. Promotion of Integrity and Prevention of

Corruption at the Company level

Requiring integrated risk management systems in state-owned

enterprises

Promoting internal controls, ethics and compliance measures in state-

owned enterprises

Safeguarding the autonomy of state-owned enterprises’ decision-

making bodies

IV. Accountability of State-Owned Enterprises

and of the State

Establishing accountability and review mechanisms for state-owned

enterprises

Taking action and respecting due process for investigations and

prosecutions

Obstacle #3 – opportunistic behaviour of individuals

Obstacle #5 – perceived likelihood of getting caught is low

Inviting the inputs of civil society, the public and press and the

business community

Join our efforts

Internationally

• Development of Implementation Guide

• Participation in the WP and regional networks

• ‘SOE day’ – 16 October, 2019

• SOE contact group

Bilaterally

• Reviews against the SOE Guidelines and the ACI Guidelines

(national, sectoral or SOE)

Work on anti-corruption and integrity in privatisation

Contact us: alison.mcmeekin@oecd.org