OECD and State-owned enterprises

On 8 November 2023 the OECD published the 2023 edition of the Guidelines on Corporate Governance of State-Owned Enterprises. The update expands expectations on climate risk, integrity, and stakeholder engagement for state ownership entities and their boards. This revision represents the first full update since 2015 and reflects significant shifts in global governance expectations around sustainability, anti-corruption, and public accountability. The guidelines serve as the international benchmark for SOE governance, influencing national ownership policies across OECD member states and partner economies worldwide.

Evolution of SOE Governance Standards

State-owned enterprises play significant economic roles across sectors including energy, transportation, telecommunications, and financial services. OECD research shows SOEs represent approximately 10% of global GDP and employ millions of workers. However, SOEs face unique governance challenges stemming from their dual commercial and public policy mandates, political influence on board appointments, and accountability to both government owners and broader teams.

The original OECD SOE Guidelines published in 2005 established foundational principles addressing ownership rationale, board independence, and disclosure requirements. The 2015 revision added focus on competitive neutrality and level playing field considerations. The 2023 edition builds on this foundation while addressing emerging priorities around climate governance and integrity frameworks.

Climate and Environmental Governance

State owners should ensure SOEs integrate climate and environmental considerations into strategies, risk management, and disclosures. The updated guidelines recommend that ownership entities establish clear expectations for SOE climate performance, including transition planning toward net-zero emissions, physical risk assessment, and adaptation strategies.

Boards should show competence in overseeing climate-related matters, potentially through dedicated committee structures or improved director training. SOE disclosures should align with emerging frameworks including the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and International Sustainability Standards Board (ISSB) standards. State owners should evaluate SOE performance on sustainability metrics alongside financial returns when assessing management effectiveness.

Integrity and Anti-Corruption

The guidelines reinforce the need for internal control systems, whistleblowing channels, and transparency in procurement and lobbying. SOEs face heightened corruption risks due to government relationships, large contract values, and operations in high-risk sectors and jurisdictions.

Enhanced expectations address board oversight of compliance programs, independent audit functions, and mechanisms for reporting suspected misconduct. Procurement processes should implement competitive procedures, conflict of interest management, and supplier due diligence aligned with international anti-corruption standards. SOEs engaged in lobbying activities should disclose political engagement, comply with applicable lobbying regulations, and implement approval processes for political contributions where permitted.

Stakeholder Accountability

Boards should engage with teams, disclose public policy objectives, and balance commercial and non-commercial mandates. The 2023 guidelines expand stakeholder concepts beyond traditional focus on employees and creditors to encompass communities affected by SOE operations, environmental advocacy groups, and civil society organizations monitoring public accountability.

SOEs should establish grievance mechanisms enabling teams to raise concerns and receive responses. Public policy objectives that SOEs pursue on behalf of government owners should be clearly documented, separately accounted for where practical, and disclosed in annual reports. The guidelines recognize that SOEs may legitimately pursue non-commercial objectives but emphasize that such mandates should be explicit, costed, and funded rather than hidden subsidies distorting competitive markets.

Board Composition and Independence

The guidelines strengthen recommendations on board independence, qualifications, and nomination processes. SOE boards should include sufficient independent directors capable of challenging management and representing interests beyond the government owner. Director nomination processes should focus on competencies aligned with SOE strategic needs rather than political patronage considerations.

Board evaluation practices should assess both individual director contributions and collective board effectiveness. Term limits and succession planning help ensure board renewal while maintaining institutional knowledge. The guidelines recommend against ministerial officials serving on SOE boards due to conflicts between ownership and regulatory roles.

Transparency and Disclosure

Enhanced disclosure expectations address SOE governance structures, ownership policies, and performance against public policy mandates. Aggregate reporting on the SOE portfolio should provide overview information enabling public accountability.

Individual SOE reports should meet standards applicable to listed companies in the same jurisdiction, including audited financial statements, governance reports, and sustainability disclosures. Government ownership policies should be publicly available documents explaining the rationale for state ownership, governance expectations, and accountability frameworks. Performance agreements between owners and SOE boards should balance commercial objectives with public policy mandates and include measurable targets.

Implementation Recommendations

State ownership entities should review existing governance frameworks against the 2023 guidelines, identifying gaps requiring policy updates or improved oversight. SOE board charters may require revision to incorporate climate governance mandates and expanded integrity provisions. Reporting frameworks should be improved to cover sustainability metrics, public policy outcomes, and stakeholder engagement activities. Training programs for SOE directors should address climate competency, anti-corruption compliance, and stakeholder accountability expectations. State owners should update performance evaluation criteria to balance financial returns with sustainability and integrity objectives.