Abstract
This paper analyses state-owned enterprises’ (SOEs) corporate governance, addressing whether there are differences between these and private enterprises that make it necessary to formulate a specific corporate governance theory for the former. This will be achieved through a case study based on Carris company, mitigating the lack of empirical knowledge in this field and taking a step forward by clearly proving what it is suggested by the literature: SOEs’ governance particularities actually influence their day-to-day business and financial viability. That helps to highlight the urgency to apply adequate corporate governance techniques to SOEs, more aligned with their characteristics. SOEs have a different legal status, more volatile operating goals, soft budget constraints, lack of public service contracts (and consequent mismatch of the corresponding compensatory allowances due for the public service provided), and different criteria for professional appointment and selection. More importantly, they suffer from multiple principals’ phenomenon: multiple principals, multiple problems. It is, therefore, recommended some changes regarding their corporate governance, such as the incorporation of the comply-or-explain principle; introduction of a code of best practices in the public managers’ appointment process; and contractual arrangements regarding the public service provided, with the multiannual allocation of the corresponding compensatory allowances.
Highlights
Bearing in mind the need to contain public expenditure and avoid tax burn increases, there is a great urge to adopt corporate governance practices to state-owned enterprises (SOEs)
This paper intends to address a simple key question: are there any significant differences in public and private companies‟ governance that require different corporate governance techniques depending on the type of companies? To answer that, it will be performed an analysis of the governance of companies belonging to the Portuguese public business sector, which encompasses the state, local, and regional business sectors
The significance that SOEs represent for the economy and society is reflected in their provision of public service, their presence in international trade, infrastructure industries, and industries with important spillovers, and their weight in GDP and employment – all relevant factors that can positively contribute to economic efficiency and national competitiveness (Christiansen, 2011; OECD, 2012; Kowalski, Büge, Sztajerowska, & Egeland, 2013)
Summary
Bearing in mind the need to contain public expenditure and avoid tax burn increases, there is a great urge to adopt corporate governance practices to state-owned enterprises (SOEs). It is necessary to concretely comprehend this concept and its most varied dimensions, trying to understand that This is a fundamental element to reinforce SOEs performance and competitiveness in the long run (Shleifer & Vishny, 1997). It will be performed an analysis of the governance of companies belonging to the Portuguese public business sector, which encompasses the state, local, and regional business sectors. Some changes may apply with this transfer, they are not relevant to the analysis performed in this paper – since both state and local business sectors belong to the public business sector and are under the same legal framework (Decree-Law No 133/2013 of 3 October). The second section will focus on Carris case study, tackling topics related to its governance. After considering the result of the analysis, recommendations on what should be implemented in the governance of non-financial SOEs are going to be proposed in the final section, where the main conclusions and further research are discussed
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