coll. - State-owned enterprises and corruption : what are the risks and what can be done?

Today more than a fifth of the worlds largest companies are state owned. State-owned enterprises (SOEs) play an important role in the global economy, particularly in key sectors such as public utilities, as well as natural resources, extractives and finance. They take different corporate forms often combining commercial and non-commercial objectives with increasingly international operations. Good governance of SOEs is critical for ensuring a level playing field in the marketplace, safeguarding the integrity of domestic economies, and supporting quality public service delivery.

Good corporate governance of SOEs, in accordance with the OECD Guidelines on Corporate Governance of State-Owned Enterprises , is also essential to help reduce the risk of corruption. In recent years, we have seen how corruption involving SOEs can cause serious economic and political damage and lead to a breakdown of public trust extending well beyond the SOEs themselves. This is why we need a concerted effort to stamp out corrupt and otherwise irregular practices in SOEs, as well as in government institutions exercising state-ownership rights.

This report, State-Owned Enterprises and Corruption , brings a comprehensive set of facts and figures to the discussion about the concrete risks facing SOEs and how they, and their state owners, go about addressing them. It will help shape an international debate that has, until now, been largely anecdotal. Based on the inputs of almost 350 members of executive management and boards of SOEs in OECD and partner countries, the report tracks the experiences of companies facing corruption and the challenges encountered by their management in making SOEs more efficient and transparent. It further charts the legal and institutional frameworks as well as concrete practices of OECD and non-OECD economies in ensuring high standards of governance and accountability in the SOEs they oversee.

The challenge is daunting. Two in five corporate insiders report to have personally witnessed corruption or irregularities in their companies in recent years. The number is even higher in SOEs operating in high-impact sectors such as extractives and public utilities where the value of concessions and public procurement contracts is typically large, despite the fact that many of these companies had implemented internal controls. This report examines why these internal controls did not work, looking for answers both within the SOEs and in the grey zone between the companies and their state owners.

A core component of the solution is to improve the way in which the state exercises its ownership rights, appoints the governing bodies of SOEs and communicates with the companies. The OECD is leading a convergence in the field of SOE governance and anti-corruption, identifying good practices in this report that will lay the foundation for new guidance for the state that goes beyond existing international standards. This process is taking place in co-operation with the G20, international organisations and civil society.

I encourage all governments to consider what the reports findings mean for the way in which they exercise ownership in SOEs, and participate in this important process of developing guidelines that contribute to stamping out corruption in this vital part of the corporate economy.

Angel Gurra

OECD Secretary-General