Moderator: Juan Munguira, Spain, member of OECD Working Party on State Ownership and Privatization Practices

Key Question:

What should be changed in the OECD Guidelines on Corporate Governance of SOEs to help improve governance in state-owned companies?

Mr Munguira explained that the OECD has just started the process of reviewing the Guidelines on Corporate Governance of SOEs. The new version of the Guidelines, first created in 2005, is expected to be ready in 2015. The moderator mentioned some of the changes that have already been suggested so far, for example, to add a chapter on the rationale for state ownership, references to corporate ethics, and extension of the Guidelines’ scope to include municipal and local SOEs.

1st Speaker: Hans Christiansen, OECD Senior Economist and Manager of OECD Working Party on State Ownership
Mr Christiansen indicated that the revision of the OECD Principles of Corporate Governance and Guidelines on Corporate Governance of SOEs has been inspired by the perception that failings in Corporate Governance worsened the effect of the financial crisis. He reminded the audience that the Guidelines are a non-binding OECD legal instrument, complementary to the OECD Principles of Corporate Governance. Additionally, he stated that this instrument is based on the model of the separation of the role of the state as an owner from its role as regulator. Government, ownership unit, SOE board and Management have different specific functions and are all independent bodies. Mr Christiansen enumerated the Guidelines’ priorities, including ensuring a level-playing field with the private sector; reinforcing the ownership function within the state administration; and providing equitable treatment of minority shareholders, among others. He also mentioned some of the changes that are being considered, such as the inclusion of a chapter on the rationale of state ownership or a more substantive preamble focusing on the scope and applicability of the Guidelines. Mr Christiansen concluded that the new Guidelines will be conceived as a stand-alone document, independent from the OECD Principles of Corporate Governance.

2nd Speaker: Andrés Oneto, Principal Executive for Competitiveness Programs, CAF
In his intervention Mr Oneto presented the updated version of the CAF Guidelines on Corporate Governance in Latin America, first created in 2004 with reference to the OECD Principles of Corporate Governance. Among the reasons behind this last revision, Mr Oneto mentioned the lessons learnt following the global financial crisis, and the wish to extend their scope to include the entire Latin American region. The CAF Guidelines take into account the OECD Guidelines on Corporate Governance for SOEs, and are applicable to both private and state-owned companies. They are not binding and should be used in order to increase companies’ productivity. There are 43 guidelines and 113 recommendations in the areas of law and equitable treatment of shareholders; general shareholders meeting; boards; instruments of control; transparency and financial and non-financial information. Mr. Oneto pointed out that the instruments should help companies identify risks, through their internal monitoring and control system, and their internal and external audits. The Principal Executive concluded by emphasizing that the CAF guidelines are based on the idea of self-regulation, although there are other bodies that can help such as regulators, supervising authorities or investors.

3rd Speaker: Alejandro Díaz, Internal Control Management “A”, SIGEN, Argentina
Mr Díaz presented his comments on those aspects of the OECD Guidelines on Corporate Governance that, in his opinion, should be revised. He thought that some of the recommendations were too wide and lacked specificity. Instead he advised to break up the guidelines, and include several recommendations –along with explanatory notes and comments- in each chapter. Mr Díaz mentioned that the section on Equitable Treatment of Shareholders shouldn’t be an independent chapter, but included in those sections about The State Acting as an Owner and The Responsibilities of the Boards. Equally, the content of the section on Transparency and Disclosure should be synthesised and included in the preamble as well as along with other chapters, since these are concepts that should be always running in the background. He agreed with the need to clarify the concept of SOEs since, as it can be seen from listening to other countries´ experiences, is used very differently all around the world. The concept on corporate ethics should also be included. Mr Díaz agreed with the idea of applying the guidelines at subnational level, which should also be reflected in the Preamble.

Before opening the session to the floor, the moderator, Mr Munguira, reminded the audience that during this year the OECD will also be undertaking the revision of the Principles on Corporate Governance. He encouraged the participants to send their comments on this subject, as the Principles are also a very relevant tool for listed SOEs.

The following points were made in the round of discussions that followed the speakers’ presentations:

Alexandre Arrobbio (World Bank) stated that the OECD Guidelines on SOEs are a reference for the World Bank, and that they find them very helpful as part of their development work, even in those cases where countries aren’t able to apply them. Mr Arrobbio emphasised that including a definition of SOE will be both challenging and useful.

It would be a good idea to include an explanation of the concept of Corporate Governance that could have the double function of being used as a didactic tool as well as give a common context for general reference.

Juan Sebastián Robledo (Colombia) insisted on the importance of having a definition of SOEs as part of the updated text. Mr Robledo questioned whether profitability was a valid argument to justify State Ownership. He disagreed with the need to make the Guidelines more specific, and argued that it was better for them to be general so that each country could adapt them to their own circumstances. He concluded by questioning the applicability of certain Guidelines in the context of strategic SOEs that represent an important part of the country’s GDP. In those situations, the boards might have Government representatives, which raise issues regarding accountability due to their status.

Conclusions and Next Steps

Daniel Blume, Senior Policy Analyst, OECD
Mr Blume summarised the topics discussed during the meeting, which included transparency and accountability, audits and RPTs. He emphasised that it was important to have participants’ feedback on those subjects that are the region´s priority in order to plan future meetings. Among the subjects that could potentially be discussed in future meetings, Mr Blume mentioned importance of boards, budget procedures and corporate ethics. He proposed the creation of a steering group, which would include representatives from the last three host countries, plus the country who will host the next meeting, along with partner international institutions and sponsoring governments. They will be in charge of proposing the agenda for future gatherings. Mr Blume concluded by giving a representative of the IADB the opportunity to talk about what the Bank does in the Latin American region.

Roberto García López, Executive Secretariat, Inter-American Development Bank (IADB)
Mr García López explained that the IADB works to strengthen a variety of institutions in the region, including SOEs. In regards to the improvement of Corporate Governance of SOEs, the IADB has in place a number of networks, which focus on working with specific groups such as budget directors or SOEs’ investors. Parliamentary forums are used to discuss how to improve budget and SOEs’ management. Mr García López concluded by emphasising the importance exchanging experiences in order to join efforts in the development of Corporate Governance.

Daniel Reposo, General Comptroller, SIGEN, Argentina
Mr Reposo thanked the OECD, CAF, World Bank, Enarsa and in particular Alejandro Díaz for making the meeting possible. Mr Reposo highlighted the importance of discussing and sharing ideas, and looked forward to seeing the new OECD Guidelines. He concluded by suggesting that one of the Argentina provinces should hold the Network’s meeting in the future.