The state should ensure that boards of SOEs have the necessary authority, competencies and objectivity to carry out their functions of strategic guidance, risk management oversight and monitoring of management. They should act with and promote integrity, and be held accountable for their actions.
VI.A. The boards of SOEs should be assigned a clear mandate and ultimate responsibility for the enterprise’s performance. The role and duties of SOE boards should be clearly defined in legislation, preferably according to company law. Board members should act on a fully informed basis, in good faith, with due diligence and care, and act in the best interest of the enterprise and the shareholders, taking into account the interests of stakeholders.
VI.B. SOE boards should effectively carry out their functions of reviewing and guiding corporate strategy and supervising management based on broad mandates and expectations set by the shareholders. They should have the power to appoint and remove the CEO. They should align executive remuneration levels with the longer term interests of the enterprise and its shareholders.
VI.C. SOE board composition should allow the exercise of objective and independent judgement. All board members, including any public officials, should be nominated or appointed based on qualifications relevant to the enterprise’s sector of activity and business profile, and have equal legal responsibilities.
VI.D. An appropriate number of independent board members should be on boards and on specialised board committees.
VI.E. Mechanisms should be implemented to avoid conflicts of interest preventing any board member from objectively carrying out their board duties and to limit political interference in board processes. Politicians who are in a position to materially influence the operating conditions of SOEs should not serve on their boards. Former such persons should be subject to predetermined cooling-off periods. Civil servants and other public officials can serve on boards under the condition that they are nominated based on merit and conflict of interest requirements apply to them.
VI.F. Good practice calls for the chair to be independent and with a role separate from that of the CEO. The chair should assume responsibility for boardroom efficiency and, when necessary, in co-ordination with other board members, act as the liaison for communications with the state ownership entity.
VI.G. Where employee representation on the board is mandated or commonplace, mechanisms should be developed to guarantee that this representation is exercised effectively and contributes to the enhancement of the board skills, information and independence.
VI.H. SOE boards should consider setting up specialised committees, composed of independent and qualified members, to support the full board in performing its functions, in particular the audit committee – or equivalent body – for overseeing disclosure, internal controls and audit-related matters. Other committees, such as remuneration, nomination, risk management or sustainability may provide support to the board depending upon the SOE’s size, structure, complexity and risk profile. Their mandate, composition and working procedures should be well defined and disclosed by the board which retains full responsibility for the decisions taken. The establishment of specialised committees should improve boardroom efficiency and should not detract from the responsibility of the full board.
VI.I. SOE boards should, under the chair’s oversight, regularly carry out a well-structured evaluation to appraise their performance and efficiency, and assess whether they collectively possess the right mix of background and competences, including with respect to gender and other forms of diversity.
VI.J. SOE boards should actively oversee risk management systems. Boards should ensure that these systems are reassessed and adapted to the SOEs’ circumstances with a view to establishing and maintaining the relevance and performance of internal controls, policies and procedures.