1. Corporate Governance Corporate Governance in State-Owned Enterprises: Specific Problems & Possible Solutions Corporate Governance in State-Owned Enterprises: Specific Problems & Possible Solutions by Nicole Beha, Marius Linkohr, Kristof Müller

2. Contents  Definition  SOEs  Specific problems  Solution strategies  Recommendations & Conclusion

3. Definition „The term State-Owned Enterprise (SOE) refers to enterprises where the state has significant control, through full, majority or significant minority ownership.“ (OECD 2005)

4. State-Owned Enterprises  natural monopolies (e.g. railroads, postal services, prison facilities)  „public goods“ (e.g. health, education)  BUT: - poor performances - inefficiences  Corporate Governance structures

5. Specific Problems of SOEs  agency problem bureaucrats as managers double principal-agent problem  non-business interests ressource transfers

6. Specific Problems of SOEs  absence of market mechanisms no threat of takeover or bankruptcy monopolies capital / investment raising situation  special role: government as regulator and owner  performance measurement

7. Solution Strategies  Corporatization adoption of private-sector structures, such as single legal entity for the firm and/or independent managers first step towards privatization  not all private structures can be used

8. Solution Strategies  incentives framework performance contracts  how is „performance“ measured?  monitoring and control / Board of Directors  shareholders‘ interests; absence of market mechanisms

9. Recommendations & Conclusion  setting clear objectives & ranking them by priority  insulating SOEs from political & bureaucratic influence  independence of the Board of Directors  transparency of the SOE

10. Questions or Comments? Thank you for your attention!