The 2006 Asian Roundtable
on Corporate Governance
The Asia Network on Corporate Governance of SOEs
John Lim
President, Singapore Institute of Directors
Session 5
Related Activities and Next Steps
Bangkok, Thailand
14-15 September 2006
The views expressed in this paper are those of the author and do not necessarily represent the opinions of the
OECD or its Member countries or the World Bank
Why?
• significance of SOEs and importance of
their corporate governance for Asian
economies
• recent progresses made but a long journey
still ahead
• complexity of the related policy challenges
• increasing demand for exchange of
experience and policy dialogue
 need a specific forum to carry out a focused policy
dialogue and investigate in-depth the appropriate policy
options to improve the governance of SOEs in Asia
Purpose
• raise awareness of all concerned
constituencies
• evaluate and benchmark current policy
frameworks and practices
• influence policy making
• support viable and effective reforms
How? Methodology
• share knowledge and experience among
policy makers, practitioners and experts
from Asia and their OECD peers
• discuss and analyse policy options
• develop relevant recommendations
• agree on priorities for reforms adapted to
the conditions in Asian economies
Using the OECD Guidelines as a reference
Who?
• Participants from 12 ARCG economies
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ownership entities / ministries in charge;
SOE officers, both CEO and board members;
members of relevant committees in Parliament;
state audit bodies in charge of supervising SOEs;
stock exchanges and securities commissions;
institutes of directors, corporate governance institutes,
private sector representatives;
• stakeholders, including public sector trade unions and
relevant civil society organisations.
• OECD peers form the Working Group
Challenges ahead to level the playing field
between SOEs and the private sector
• complete corporatization and harmonize
legal status
• ensure an effective separation between the
ownership function and other state functions,
including regulation
• fair access to finance
• disclosure and transparency (esp. covering
and cost of specific obligations )
Challenges ahead regarding the role of the
state as a shareholder
• distinguish between being an active owner and
interfering in day-to-day management
• have the right persons on boards and empower
these boards, i.e. delegate them sufficient
authority and ensure their independence
• professionalize SOE management and link
remuneration to performance
Challenges ahead regarding the
organisation of the ownership function
• centralisation allows a better focus on the
ownership function per se and favours a
transfer of responsibilities to SOE boards
• but there are costs and challenges:
– continuing interference from and loyalty to technical
ministries
– resistance as loss of significant power and rent
seeking opportunities
– the new centralised ownership agency might
become extremely powerful, and not necessarily
more competent than technical ministries
Challenges ahead regarding accountability
• balancing the need for accountability and level
playing field with the private sector
– question the adequacy and relevance of multiple
controls, sometimes unnecessary and/or excessive
• positive effect to underpin investors’ confidence and thus
to facilitate access to external finance
• demobilisation and focus by management and boards on
avoiding making mistakes instead of looking for better
performance
– Need to focus on critical control mechanisms,
without sacrificing the need for speed and delivering
value, nor the public demand for accountability
Some critical steps
• make corporate governance a public debate
(as vested interests in the political elite)
• decrease size of state ownership
– reduce the size of the problem
– focus on policy reforms
• develop a clear ownership policy
• have the right persons on boards
Some usefuls steps
• In order to have the right persons on boards
– avoid political appointees
– focus on competencies
– build up data base of qualified candidates
– involve the boards themselves, in particular the
chairmen, in their nomination
– separate the chairman of the board from the CEO
– Chairman more independent if elected by the AGM
– move away from the culture of complacent boards
One crucial step
• develop a clear ownership policy in order to:
– strengthen the government thinking
– raise awareness on related issues
– make the relevant policies consistent
– debate the issue in public
• the ownership policy should focus on how
the state should behave as a good owner
• it is critical to ring fence the ownership policy
and to implement it effectively
Next steps
– The Network plans to meet at least three times to
cover the six chapters of the OECD Guidelines
– Preliminary meeting in Beijing May 2005, hosted by the DRC
– First plenary meeting in Singapore in May 2006, hosted by the
Singapore Institute of Directors
– Next meeting in the Spring 2007 in the Philippines, hosted by the
Institute of Corporate Directors
– Each meeting will be dedicated to comparing regional
practices with one or two chapters of the Guidelines
– To keep the dialogue focused and to produce tangible
outcomes, the Network will develop a Policy Brief
with specific recommendations