The weight of SOEs has increased over the past two decades which makes their corporate governance and ability to compete on a level playing field important. Addressing these policy imperatives requires active and professional state ownership, including clear and transparent goals for SOEs, and ownership arrangements that encourage integrity, transparency and accountability. This chapter looks at how various jurisdictions perform in these areas.
Ownership and Governance of State-Owned Enterprises 2024
Abstract
States play a growing role as owners of enterprises. This report shows that:
126 of the largest 500 companies worldwide by revenue are SOEs (up from 34 in 2000 and 102 in 2017). They employ 21 million people, own USD 53.5 trillion in assets, and generate over USD 12 trillion in revenue and USD 730 billion in profits annually.
The public sector is also a large investor in public equity markets worldwide, accounting for USD 11.7 trillion of global market capitalisation, although with significant differences among countries.
In 2023, companies with more than 25% of public sector ownership accounted for nearly 12% of global market capitalisation. This amounts to 2 037 companies globally.
This varies across markets, however: in OECD countries as a whole, just 2% of market capitalisation is under public sector control, compared to 16% in Latin America and Asia and 50% or more in some countries, many of them emerging markets.
Through state ownership, governments may pursue public policy goals such as improving infrastructure, developing markets where there may be market failures, and promoting social inclusion. However, this role comes with a responsibility to manage public resources efficiently and with integrity. Active and professional state ownership ensure SOEs meet their goals while minimising the risks of unfair competition or undue influence. Drawing from the experiences of different jurisdictions, this report finds that:
Despite the importance of SOEs, only 53% of jurisdictions have an ownership policy. Ownership policies define the overall rationales and goals for owning SOEs, establish how those goals are pursued, and delineate other key aspects such as the governance of SOEs and the roles of the state and other shareholders, among others.
52% of jurisdictions have explicit rationales for why they own stakes in companies. Having clear rationales for ownership is important to align economic and policy objectives, facilitate the allocation of public resources, promote accountability and transparency, increase investor confidence, and reduce the risks of corruption and undue interference. Explicit rationales for owning SOEs can be detailed in policy or legal documents and are a key component of a solid state ownership policy.
Effective state ownership policies require a separation of the potentially conflicting roles of the state as policy maker, regulator, and enterprise owner. This requires designating which bodies in government should exercise ownership rights (i.e. the ownership entity). According to best practices, such functions should be centralised or co-ordinated through a clear mandate. This allows the state to act under a whole-of-government basis, enhancing coherence and pooling expertise.
53% of jurisdictions follow a centralised model, up from 41% in 2021. However, only 11% have a centralised ownership department, ministry or holding company exclusively performing the role of ownership. 27% of jurisdictions have a dispersed model, spread across different ministries, up from 17% in 2021.
Only 20% of jurisdictions have ownership entities that are staffed with private sector secondees. 80% employ public servants only.
Only 23% of jurisdictions’ ownership entities are directly financed by SOE dividends. In two jurisdictions, ownership entities are corporatised into holdings and are financed through the dividends of their portfolio companies.
Disclosing the performance of SOEs is important for transparency and accountability. Aggregate reports on the SOE sector offer comprehensive insights into the overall performance and evolution of the full SOE portfolio.
64% of jurisdictions produce aggregate reports (of which 59% cover all SOEs and 41% cover a subset of the state’s portfolio of SOEs).
Among jurisdictions that produce an aggregate report, 37% include a full spectrum of financial and non-financial information, in line with best practices.
State-owned enterprises are firms that are owned or controlled by the state. SOEs are diverse, as is the rationale for state ownership. SOEs can be present at the national or sub-national level and be directly owned by ministries or agencies with controlling interests. They can also be indirectly owned or controlled through, for example, a parent SOE as part of corporate group structures or holdings, or through other vehicles such as sovereign wealth funds, government investment funds, or state pension funds.
SOEs may operate in “natural monopolies,” where competition by other firms is limited or may not be practical due to high barriers to entry, large capital needs or high fixed costs, and major economies of scale. Examples include some portions of network industries or public utilities such as electricity, water and sewage, transportation, and telecommunications. SOEs may also operate in contested sectors domestically or internationally such as banking and finance, transport, manufacturing, and industry. Box 1.1 provides an overview of key concepts related to SOEs.
What are state-owned enterprises?
According to the OECD Guidelines on Corporate Governance of State-Owned Enterprises, any undertaking recognised by national law as an enterprise, and in which the state exercises ownership or control, should be considered as an SOE. This includes joint stock companies, limited liability companies and partnerships limited by shares. Moreover, statutory corporations, or other legal personalities established through specific legislation, should be considered as SOEs if their purpose and activities, or large parts of their activities, are of an economic nature.
Key concepts from the SOE Guidelines to understand and define SOEs include:
Ownership or control. The SOE Guidelines apply to SOEs that are owned and/or controlled by the state. Ownership comprises direct majority ownership and, provided that control exists, includes other types of direct and indirect ownership. Control can be exercised if an ownership entity (or several ownership entities acting in concert): is the ultimate beneficiary owner of the majority of voting rights; or otherwise exercises an equivalent degree of control.
Economic activities, which involve offering goods and services in a given market and which could, at least in principle, be carried out by a private operator in order to make profits. Economic activities mostly take place in markets where competition with other enterprises already occurs or where competition given existent laws and regulations could occur.
Public policy objectives (PPO) are objectives benefitting the public interest within the jurisdiction concerned. These could include carrying out of public service obligations as well as other special obligations undertaken in the public interest which can be set in addition to financial performance objectives. In many cases, public policy objectives might otherwise be achieved via government agencies, but have been assigned to an SOE for efficiency or other reasons.
Public service obligations (PSO) are obligations placed upon providers of public services in order to ensure the intended users’ appropriate access to essential economic or social services, which would not be provided by the market, or in a manner sufficient to fulfil the PSO, under commercial considerations. While the design and mechanisms for the implementation of PSOs can vary greatly amongst jurisdictions, PSOs may for example consist of universal service and/or affordability requirements imposed on providers of public services.
Source: OECD (2024[1]), OECD Guidelines on Corporate Governance of State-Owned Enterprises, https://doi.org/10.1787/18a24f43-en.
The share of SOEs among the world’s largest companies has nearly quadrupled over the last two decades. Today, the largest 500 listed and non-listed companies by revenue globally include 126 SOEs, or around 25%. This is up from 34 SOEs in 2000 and 102 in 2017. These large SOEs employ over 21.2 million people, own USD 53.5 trillion in assets, and generate USD 12 trillion in revenue and USD 730 billion in profits annually. Furthermore, 91 (72%) of them are not publicly traded which has important implications, as listing requirements and the presence of non-state shareholders tend to drive better corporate governance and performance compared with non-listed peers (Fortune, 2024[2]) (Table 1.1 and Box 1.2).
Note: Fiscal years ending before March 2023. In 114 of the 126 companies, the state has ownership of 50% or more, as indicated in Fortune’s profile for each company. Annex B provides more information on SOEs in the Fortune Global 500 list.
Source: Fortune, Global 500, consulted in January 2024.
SOEs have also become more important in public equity markets. Over the past two decades, many states have listed minority stakes of SOEs as a first step towards or as an alternative to complete privatisation. As a result, the public sector has become a large investor in public equity markets worldwide and today accounts for USD 11.7 trillion of global market capitalisation. There are significant differences between countries in the share of market capitalisation owned by the public sector. In Czechia, Colombia, Latvia, and Lithuania, the public sector holds over 35% of the listed equity, and in Saudi Arabia the figure rises to 83% (Figure 1.1).
The importance of the public sector across markets also shows in the number of companies in which the public sector owns over 25% of the shares. By the end of 2023, these 2 037 listed companies represented 12% of global market capitalisation. However, public sector participation in public equity markets varies between regions, whether in terms of the share of listed companies or in total market capitalisation. Figure 1.2 shows that among OECD countries, companies in which the public sector holds over 25% of the shares represent only 2% of market capitalisation while they represent 16% in Latin America and in Asia (excluding China and Japan), 47% in the People’s Republic of China (hereafter ‘China’) and 68% among “others”.
The Fortune Global 500 list is composed of four indicators: revenues, profits, assets, and number of employees. It ranks companies by total revenues for their respective fiscal years ending on or before 31 March 2023.
The largest SOE in the world (and second largest company overall) is Saudi Arabia’s national oil company, Saudi Aramco, with over USD 603 billion in revenue in 2023, nearly 51% higher than in 2022. The other companies in the top five are four Chinese groups: State Grid, China National Petroleum, Sinopec Group and China State Construction Engineering. Saudi Aramco also had the largest profits of all firms in 2023 with over USD159 billion, well above second and third placed Apple (USD 99.8 billion) and Microsoft (USD 72.7 billion).
In terms of assets, the top five companies are financial SOEs: the Industrial & Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China, Fannie Mae (United States), and the Bank of China. In terms of employment, the largest SOEs are China National Petroleum (over 1 million employees), State Grid (870 000), and China Post Group (752 000).
Eighty-six of the 126 SOEs in the list are Chinese-owned companies. They employ a total of 16 564 500 people, make nearly USD 8.3 trillion in revenue and over USD 355 billion in profits, and have USD 35.6 trillion in assets. Seventy-nine of these SOEs are not listed on a stock exchange. Chinese SOEs operate in all types of industries, with many of them in metals, engineering and construction, and mining and crude oil production, but also in other sectors such as automotives, real estate, shipping, and transportation and logistics. (Annex B)
Source: Fortune, Global 500, consulted in January 2024.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Note: Asia excl. CN&JP = Asia excluding China and Japan. LAC = Latin America and the Caribbean. The public sector refers to direct ownership by central governments, local governments, public pension funds, SOEs and sovereign wealth funds (SWFs), hence the data presented in this section do not correspond strictly to the definition of SOEs as put forward in the SOE Guidelines.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Listed SOEs have, by definition, mixed ownership, where the state is one owner besides other types of owners such as institutional investors. Listed SOEs are therefore exposed to the influence of non-state investors which can have implications for strategic decision-making while counterbalancing the interests of the state. Figure 1.3 shows the ownership structure of listed companies. A general trend across regions is that institutional investors’ ownership is significantly higher in listed companies with 25% or less of public sector ownership. For example, in Asia (excluding China and Japan) institutional investors own 20% of the equity in companies with 25% or less of public sector ownership, compared to 12% in companies with more than 25% of public sector ownership.
Note: Asia excl. CN&JP = Asia excluding China and Japan. LAC = Latin America and the Caribbean. The public sector refers to direct ownership by central governments, local governments, public pension funds, SOEs and sovereign wealth funds (SWFs), hence the data presented in this section do not correspond strictly to the definition of SOEs as put forward in the SOE Guidelines. “Other free float” comprises retail investors and institutional investors that do not require to disclose their holdings.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Public sector investments in listed companies reached USD 11.7 trillion at the end of 2023. This includes investments by central and regional governments, public pension funds, SOEs and sovereign wealth funds (SWFs). Figure 1.4 shows that governments own the largest share of equity among all types of public sector investors.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Levels of public sector ownership vary between regions (Figure 1.5). In China, where the level is the highest, the public sector invested USD 3.5 trillion in equity markets in 2023, of which 78% was by governments (which includes the local public sector as well as the non-domestic public sector). In Asia (exc. China and Japan) and the group “others”, public sector ownership of listed equity reached nearly USD 1.8 trillion and USD 3 trillion, respectively. Governments account for 77% of that amount in “others”. In Europe, public sector investment is lower at USD 1.3 trillion, half of which is by governments and 30% by SWFs. In the United States, total public sector investment is around USD 1.6 trillion, most of which by public pension funds and foreign-owned SWFs.
Looking at the regional origin of public sector ownership, Figure 1.6 shows that China accounts for 33% of the global total, followed by “others” and Europe. Most of those investments originate from the government, followed by SWFs and SOEs. The latter play a prominent role in Asia (excluding China and Japan), China, and Latin America (LAC) (Figure 1.7). In contrast, pension funds account for the bulk of investments in the United States and “other advanced” markets. Markets with significant public sector involvement in listed companies are typically those where the domestic public sector plays a prominent role in both the economy and capital markets.
Note: Data as of end-2023.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
Source: OECD Capital Market Series dataset, FactSet, LSEG, Bloomberg.
The rationale for state ownership of enterprises varies among countries and industries. It can typically be said to comprise a mix of social, economic, and strategic interests. Examples include public policy objectives, regional and sustainable development, the supply of public goods and services, as well as the existence of so-called “natural” monopolies where competition is not deemed feasible (OECD, 2024[1]). For example, in some economies the rationales for SOE ownership are linked to the need to remedy market failures and provide goods and services for which there is no likely private supplier (OECD, 2021[3]). In contingency contexts such as economic and financial crises or the global Covid-19 pandemic, various governments have taken stakes in debt distressed firms (e.g. car manufacturers, financial institutions, and aviation) in the public interest, for example to ensure financial stability and preserve jobs and economic activity. However, many soon after divested those assets and established safeguards to ensure that short term interventions did not turn into longer term structural support (OECD, 2020[4]; 2021[5]). In other cases, countries have tried to use state ownership to advance national development strategies, foster the growth of certain industries and stimulate structural transformation (Kyunghoon and Sumner, 2021[6]), albeit with varying levels of success (OECD, 2015[7]). Chapter 5 on Sustainability and state ownership provides an analysis of how SOE policies are used around the world to advance sustainability commitments, including concerning climate change.
Privatisation rationales are also important. The privatisation of an SOE will typically be justified by the fact that the company no longer falls within the rationale for state ownership. Common rationales for privatisation include: (1) the need for government intervention is no longer present (e.g. the government intervened because of a market failure and that market failure has been corrected); (2) raising revenue for the national treasury either to reduce debt or to raise expenditure; (3) improving economic or sectoral economic performance; (4) enhancing the efficiency of the individual SOE; (5) developing capital markets; (6) diversifying corporate ownership and/or attracting outside investment; (7) attracting a strategic or foreign investor; and (8) opening up markets for competition and improving service delivery (OECD, 2019[8]).
The mix of economic and public interests can lead to unique governance challenges for SOEs that require specific corporate governance frameworks and mechanisms. For example, proximity to government makes them particularly at risk of undue political interference, weak accountability and integrity, and self-serving behaviour by corporate insiders, among others (OECD, 2024[1]). The distance between the politicians and civil servants who oversee SOEs, the SOE management, and the general public who is the intended ultimate beneficiary, can lead to specific agency problems because citizens cannot exit their investments like shareholders can; there is a lack of consensus among citizens on the objectives of the government; and there are weaker mechanisms for oversight of accountability (Milhaupt and Pargendler, 2017[9]).
Addressing these challenges requires robust ownership policies that provide the market and the public with a clear understanding of the goals and priorities of state ownership (Box 1.3). These ownership policies can take the form of a high-level policy document describing the general justifications and rationales for ownership of SOEs as well as the ownership arrangements and the institutional mechanisms through which the state exercises its shareholding responsibilities in individual enterprises (see Section 1.4) (OECD, 2021[3]).
Despite the importance of ownership policies, this report finds that 47% of the 49 jurisdictions for which information is available have yet to introduce an overarching SOE policy (Table 1.2). Furthermore, only nine jurisdictions report that they review and update their policy regularly, including Costa Rica, Estonia, Finland, Germany, Italy, Latvia, Norway, Sweden, and Switzerland (OECD, 2024[10]). This is important as ownership polices should include mechanisms for their periodic review, considering evolving ownership rationales.
Note: Austria, the Slovak Republic and the United States declare to have partially developed a policy. Information obtained from the latest edition of the OECD Product Market Regulation (PMR) indicators for 24 jurisdictions. When a jurisdiction responded that it had introduced a policy, but the PMR information indicates otherwise, the PMR information is prioritised. This is the case of Croatia, Greece, Iceland, Ireland, and New Zealand.
Source: OECD Working Party on State Ownership and Privatisation Practices and OECD PMR database 2023.
Chapter I in the SOE Guidelines notes that the state exercises ownership of SOEs in the interest of the general public and that it should carefully evaluate and disclose the rationales that justify such ownership and subject these to a recurrent review. Addressing this requires that the government:
Develops an ownership policy defining rationales and goals, the roles of the state and shareholders in the governance of SOEs, how the policy is to be implemented, and the roles and responsibilities of the government offices involved.
Establishes appropriate procedures of accountability to relevant representative bodies and disclosure to the public.
Defines, publicly discloses, and recurrently reviews the rationales of ownership and public policy objectives of individual SOEs or groups of SOEs.
Examples of state ownership policies
Under a mandate by Parliament, the Swedish government has established a clear ownership policy to manage SOEs actively and professionally with long-term value creation as an overall objective. The policy refers to the legal frameworks governing ownership and the attributes of the Government Offices in charge of SOE supervision, including the designation of the Ministry of Enterprise and Innovation as the main SOE management agency. It also establishes guidelines for the functions, nomination, and composition of the boards of directors of SOEs, financial targets, public policy assignments (when relevant), policy targets, etc. Under its principles for corporate governance of SOEs, the policy also includes sustainable value creation and strategic targets, in particular sustainable business, requirements of labour law conditions in purchasing, international guidelines on responsible business conduct, and considerations of the 2030 Agenda.
Norway also offers a good example in setting state ownership policy. Its approach to ownership policy is based on four key features:
Categorisation: SOEs are divided into two categories: those where the state's goal is the highest possible return over time in a sustainable manner (SOEs that primarily compete with other enterprises), and those where the state has various public policy goals (SOEs that do not compete with other enterprises).
Active ownership: The state actively exercises its ownership role through several mechanisms, including setting expectations for the companies, appointing board members, and engaging with stakeholders.
Responsible ownership: The state adheres to the key elements of the framework for the exercise of ownership, including generally recognised principles and standards for corporate governance.
Expectations: Defining clear expectations of SOEs with respect to social, environmental and financial factors.
Source: Government Offices of Sweden (2020[11]). State Ownership Policy and principles for state-owned enterprises 2020, and Government of Norway (2022[12]). New report to the Storting on state ownership.
The SOE Guidelines note that an ownership policy should, among other things, define the overall rationales and goals for state ownership (OECD, 2024[1]). Different jurisdictions use explicit or implicit rationales in relevant policy or legal documents (Figure 1.8). Explicit rationales directly put forward the state’s interest in owning specific SOEs or portfolios of SOEs. They are reflected in specific legislation, government decisions, resolutions or decrees, government statements or some combination of these (OECD, 2018[13]). Of the 58 jurisdictions for which information is available, 52% have explicit rationales for ownership policies (30 jurisdictions) (Table 1.3).
Implicit rationales may be derived from the overall legislative and policy framework, including from company and public administration law and sectoral policies, and/or from legislation creating individual (statutory) SOEs, SOE articles of association, and contracts between the SOE and relevant shareholder agencies (OECD, 2018[13]). This is the case of 40% of jurisdictions (23). Nine per cent of jurisdictions (5) do not have formal ownership criteria.
The OECD Indicators of Product Market Regulation (PMR) reveal that from another sample of 45 jurisdictions, 76% produce a high-level policy document that clearly states the rationale for the government holding ownership rights in each commercial SOEs (Table 1.4).
Source: OECD Working Party on State Ownership and Privatisation Practices and OECD PMR database 2023.
Source: OECD PMR database 2023.
Note: Based on a total of 58 jurisdictions where the rationale is explicit or implicit. More than one source of ownership rationale may exist per jurisdiction. The category “Decisions, regulation or decree” refers to a set of legal documents that are presently enforced and do not constitute voluntary measures.
Source: OECD Working Party on State Ownership and Privatisation Practices.
The state exercises its shareholding responsibilities in SOEs through a diverse range of institutional arrangements (OECD, 2020[14]). These range from more centralised to less centralised structures, influenced by historical legacies, levels of institutional development, and political frameworks. Various jurisdictions have sought to enhance the centralisation or co-ordination of ownership arrangements over time.
The ownership entity is typically the part of the state responsible for the ownership or co-ordination of, or the exercise of ownership rights in, or control over, the SOEs. An “ownership entity” can be understood to mean either a single state ownership agency, a co-ordinating agency, a government ministry, or another public entity responsible for exercising state ownership (Figure 1.9). Ownership entities can moreover be organised into corporatised state-owned holding companies (SOHCs). An ownership entity will typically be organised separately from policy making and regulatory functions, and separately from the governing bodies of SOEs.
The state ownership entity
The SOE Guidelines establish that 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 SOE Guidelines note in particular that the exercise of ownership rights should be clearly identified within the state administration and should be centralised in a single ownership entity, or, if this is not possible, relevant ownership functions should be carried out under the oversight of a co-ordinating body with a clear mandate to act on a whole-of-government basis (OECD, 2024[1]). Box 1.4 provides details on the importance of a centralised or well co-ordinated function.
The SOE Guidelines note that it is critical for the ownership function within the state administration to be clearly identified, whether it is located in a central ministry such as the finance or economy ministries, in a separate administrative or corporate entity, or within a specific sector ministry. The ownership function of SOEs is the entity that exercises the power, responsibility, or steering ability to appoint boards of directors; set and monitor objectives; and/or vote on the company shares on behalf of the government.
Centralisation can be an effective way to clearly separate the exercise of the ownership function from other potentially conflicting activities performed by the state, particularly market regulation and industrial policy. It can also be a helpful way to pool together expertise and more effectively monitor portfolio performance.
A centralised ownership model is characterised by one central decision-making body acting as shareholder in the majority or certain categories of SOEs. Its role includes setting the state’s rationale and objective as an owner for each SOE, nominating directors, setting targets and tracking and evaluating SOEs’ performance, and exercising shareholder rights, such as voting at the general meeting. The ownership entity is also responsible for setting and monitoring broad mandates and expectations for SOEs based on its ownership policy, co-ordinating (when relevant) its decisions with other government stakeholders, and defining applicable frameworks and important matters relating to the governance of SOEs.
If the ownership function is not centralised, governments should establish a strong co-ordinating entity overseeing the different administrative departments or corporate entities carrying out ownership functions.
Exercising ownership rights through state-owned holding companies (SOHCs) is another form of centralisation and, depending on its own corporate governance arrangements and legal form, can permit a separation of the state’s ownership, policy and regulatory functions.
Source: OECD (2024[1]), OECD Guidelines on Corporate Governance of State-Owned Enterprises 2024, https://doi.org/10.1787/18a24f43-en.
Ownership models
It is often difficult to categorise existing organisational structures into a rigid model. No two state ownership models are the same, and no one jurisdiction strictly applies one single ownership model without exceptions. Nevertheless, ownership models can be broadly classified into one or more of the following types (OECD, 2020[14]):
Centralised model: One central decision-making body undertakes the mission of shareholder in all companies and organisations controlled or held, directly or indirectly, by the state. Financial targets, operational and technical issues, and performance monitoring are all the responsibility of the central body. While there are different ways of appointing board members, essential input usually comes from the central body. The institutional arrangements may vary considerably across jurisdictions, ranging from governmental departments, state agencies, to corporatised holdings where the state is the shareholder.
Co-ordinating agency model: Operates in an advisory capacity to other shareholding ministries on technical and operational issues and often their most important mandate is to monitor SOE performance. This model consists of a department with non-trivial powers over SOEs, but where ownership rights are formally exercised by other ministries or departments. In cases where the role of these central agencies is more limited and the autonomy of line-ministries retained, this model could potentially lead to considerable overlap with the decentralised model.
Dual ownership model: Two ministries or other high-level public departments share ownership in each individual SOE. Usually, one ministry sets financial objectives (typically the ministry of finance), and another ministry (typically a sectorial one) develops and formulates policy priorities. If established, with well-articulated responsibilities, the dual model could strike a balance between a model in which numerous and contradictory ownership objectives result in a “passive conduct” of the ownership function and a model that allows for excessive intervention by the state.
Twin track model: The twin track model is a unique offshoot of centralisation but within simultaneously established "ownership systems". Two or more different government institutions exercise exclusive ownership functions on their respective portfolios of SOEs. There are two SOE ownership units operating simultaneously for separate sets of SOEs based on their designations.
Dispersed model: No single institution or state actor is responsible for the ownership function. The ownership of each SOE is conducted by one line-ministry or other government institution. Various institutions are typically involved. In this case, SOEs could often be publicly perceived as an extension of the ministerial powers of the ownership ministries.
While there is a continuing trend towards centralisation in state ownership arrangements, which is consistent with the recommendations of the SOE Guidelines, it is important to note that the dispersed ownership model remains the second most popular model after the centralised one. A breakdown of jurisdictions’ application of these models is provided in Figure 1.10 and Table 1.5, which show that 53% of jurisdictions (29 out of 55) have adopted a centralised or a co-ordinated model, up from 41% in 2021 (OECD, 2021[3]). Eleven per cent of jurisdictions (6 jurisdictions) have a centralised ownership department, holding company or ministry performing the ownership role, 20% (11 jurisdictions) have a centralised portfolio with ownership responsibilities over a significant subset of the state’s SOE portfolio, and 22% (12 jurisdictions) have a co-ordinating entity (e.g. a department or agency). Twenty-seven per cent (15 out of 55) have a dispersed model, an increase from 17% in 2021. This increase is the result of some jurisdictions stepping back from good practice and of the inclusion of new jurisdictions.
As noted in Box 1.4, state-owned holding companies (SOHCs) are an increasingly popular form of centralisation of the ownership function. Depending on their own corporate governance arrangements and legal form, SOHCs can permit a separation of the state’s ownership, policy and regulatory functions. In some contexts, the indirect exercise of ownership via SOHCs can ensure arm’s length separation from other government functions, thereby shielding SOE activities from undue political or day-to-day interference. The mission of many SOHCs is to act as an owner-representative and to manage the state’s holdings as an active asset manager or investment company, with the aim of sustainably growing shareholder value through long-term and active ownership. However, SOHCs may not be suitable in all contexts, especially if their governance is vulnerable to undue political interference or other irregular practices (OECD, 2024[1]). Table 1.6 gives examples of jurisdictions applying this model.
Source: OECD Working Party on State Ownership and Privatisation Practices.
Source: OECD Working Party on State Ownership and Privatisation Practices and OECD PMR database 2023.
Note: Information updated in 2024. For Azerbaijan, the AIH is technically not a holding company exercising ownership rights but rather a co-ordination entity.
Source: OECD (2022[15]), State-owned holding companies: Background note for the Asia-Pacific Network Meeting on Corporate Governance of State-Owned Enterprises.
Requisite capacities of the ownership entity: staffing and funding
The SOE Guidelines establish that the ownership entity should have the capacity, personnel, and competencies to effectively carry out its duties and be held accountable to the relevant representative bodies. The ownership entity should, where applicable, enjoy a certain degree of flexibility vis-à-vis its responsible ministry in the way it organises itself and takes decisions with regards to procedures and processes. The ownership entity should also enjoy a certain degree of budgetary autonomy that can allow flexibility in recruiting, remunerating and retaining the necessary expertise, for instance through fixed-term contracts or secondments from the private sector (OECD, 2024[1]). Among 51 jurisdictions, only 9 (18%) have a mix of public servants and private sector secondees as staff of their ownership entities. Eighty per cent employ public servants only (Figure 1.11 and Table 1.7). Furthermore, ownership entities receive dividend income as a source of revenue in only in 12 jurisdictions (23%), and in 2 jurisdictions (Austria and Portugal), ownership entities are corporatised into holdings and are thus financed through the dividends of their portfolio companies. (Figure 1.12 and Table 1.8). In 77% (39) of jurisdictions, state ownership entities are funded only from the government budget.
Source: OECD Working Party on State Ownership and Privatisation Practices.
Source: OECD Working Party on State Ownership and Privatisation Practices.
Source: Data gathered from the OECD Working Party on State Ownership and Privatisation Practices, which has been subject to a verification procedure in 2024.
Source: OECD Working Party on State Ownership and Privatisation Practices.
Aggregate reporting practices
Aggregate reporting is a one-stop-shop for information, published on an annual basis, on the financial and non-financial performance of a significant share of the economically important SOE portfolio of a jurisdiction. Reporting provides the full picture of the performance of the SOE portfolio for the reporting period, compares it with past performance, and can include “forward looking” elements such as targets or forecasts. Reporting is not purely compliance driven. In fact, reporting should provide the “bigger picture” on critical contextual and non-financial information that supports an informed reading of financial information. Information should be of high quality, comparable, concise and accessible enough to give stakeholders a meaningful understanding of the key issues and over time (OECD, 2022[16]) (Box 1.5).
The coverage and depth of aggregate reporting varies across jurisdictions. Reporting should, at the minimum, cover three main pillars: (1) overview of the composition, performance and value of the sector; (2) financial reporting in aggregate and across individual SOEs/by sector; and (3) non-financial reporting in aggregate and across individual SOEs/by sector on thematic areas. Key financial performance indicators such as return on equity and equity/assets ratio, dividend policy, share of employment, and portfolio value are common elements. Among other areas, the report should cover the achievement of public policy objectives, the nomination, composition, qualifications and remuneration of boards and executives, and detailed reporting on individual state-owned enterprises or by sector. Moreover, while non-financial reporting has traditionally focused on governance, there is a trend to move towards more robust reporting on social and environmental issues and risk management. An emerging area of good practice is to evaluate how individual SOEs perform against financial and non-financial targets set by the state and to disclose non-commercial assistance (OECD, 2022[16]).
Table 1.9 shows that 64% of jurisdictions (34 out of 53) produce aggregate reports, with 38% (20) producing them for all SOEs and 26% (14) for a defined portfolio. Only 8% (4) of jurisdictions produce ad hoc reports or regular reports to parliament, 13% publish an online directory instead of an aggregate report, and 15% (8) do not produce aggregate reports but an online inventory of financial and (sometimes) non-financial information (Figure 1.13).
Ad hoc reports take various forms and can serve to inform the parliament and the public about the achievements, performance and financial position of SOEs at the end of each reporting year. Although they are not always presented in the same format as an annual aggregate report, with the audience being primarily representative bodies responsible for ensuring accountability of the ownership function, they can still be a valuable source of transparency, information disclosure and accountability. Such reports can be a useful starting point to developing more sophisticated forms of annual aggregate reporting (OECD, 2022[16]).
The scope and nature of online inventories vary from one jurisdiction to another, but they tend to be focused on financial information and quantitative data on the SOE sector rather than providing an assessment of the achievement of state ownership objectives. The advantage of an online inventory is that it can regroup information from disparate sources and can be regularly updated to ensure timely information. More sophisticated portals have features that allow users to interact with the data, making it searchable and downloadable either in aggregate or disaggregate format (i.e. by sector, ownership entity or enterprise). In other cases, the online inventory offers a broader overview with general data on the sector and distribution, employment data, board composition, and economic and financial indicators. Best practice would be to couple the online inventory, based on robust data, and a narrative annual aggregate report to ensure the accompanying analysis provides the “bigger picture” on critical information (OECD, 2022[16]).
The Chilean Ministry of Finance recently launched a website that contains centralised information about Chilean SOEs. The website publishes aggregate reporting on the financial and non-financial performance of SOEs (decentralised and under the supervision of the ownership entity SEP) as well as information on the goals of the government’s ownership policy, regulations and practices regarding the financing and governance of SOEs. In doing so, the Ministry of Finance aims to enhance transparency and disclosure practices in the SOE sector, as well as to keep taxpayers and civil society informed about the role of the state as a shareholder.
Source: Government of Chile (2024[17]), Empresas Estatales, https://empresasestatales.cl
Table 1.10 gives an overview of the types of information that different jurisdictions make available. It shows that 16 out of 43 jurisdictions for which there is information available (37%) divulge a full range of information (e.g. on the state ownership policy, financial and non-financial performance, employment). Table 1.11 shows that virtually all jurisdictions for which information is available (34 of 35) disclose SOE information to the public.
Does the state ownership entity produce an aggregate report on SOE financial and non-financial performance?
Source: OECD Working Party on State Ownership and Privatisation Practices.
Source: OECD Working Party on State Ownership and Privatisation Practices.
What information is included in the aggregate report?
Source: OECD Working Party on State Ownership and Privatisation Practices.
To whom is the information made available?
Source: OECD Working Party on State Ownership and Privatisation Practices.
References
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