GOOD CORPORATE GOVERNANCE
Sound policies should be formulated
Good corporate governance is intended to facilitate responsible, efficient and prudent management of a company, to increase a company’s accountability and to preempt and avoid massive disasters. It is understood that good corporate governance helps companies operate more efficiently, improves access to capital, mitigates risk and safeguards against mismanagement.
According to the International Finance Corporation (IFC) of the World Bank Group:
“Corporate governance is defined as the structures and processes by which companies are directed and controlled. Good corporate governance helps companies operate more efficiently, improve access to capital, mitigate risk and safeguard against mismanagement. It makes companies more accountable and transparent to investors and gives them the tools to respond to stakeholder concerns. Corporate governance also contributes to development. Increased access to capital encourages new investments, boosts economic growth, and provides employment opportunities.”
This of course is equally relevant to state-owned enterprises. The Organization for Economic Co-operation and Development (OECD) has issued guidelines on this matter (2015 Guidelines on Corporate Governance of State-owned 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, with a high degree of professionalism and effectiveness. (…) The government should allow SOEs full operational autonomy to achieve their defined objectives and refrain from intervening in SOE management. The government as a shareholder should avoid redefining SOE objectives in a non-transparent manner. (…) The state should let SOE boards exercise their responsibilities and respect their independence.”
The OECD believes that sound policies should be formulated so that it is clear how the government should conduct itself as a shareholder. The basic principles of transparency and accountability to the state (the public) should be adhered to, with the government taking a professional and result-oriented approach. The OECD Guidelines are the international benchmark for corporate governance and they establish the minimum standards required for an effective governance.
Based on these standards, the government should:
● avoid involvement in the daily management of business operations (day-to-day business), and
● allow the enterprise full operational autonomy.
It is necessary to formulate policies that ensure the following:
● clear guidelines on how government should behave as shareholder;
● basic principles of transparency and public accountability; and
● requirements for the government to adopt a professional and results-orientated position.
In my opinion, the operations of a government-owned company are not part of the government’s duties and it is therefore not its responsibility to interfere in the day-to-day management of such companies. These companies–apart from matters regarding concessions, licenses and other issues of public interest–must be safeguarded against political interference and allow to function independently.
Karel Frielink
(Lawyer/Attorney)
(7 June 2021)
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