Governance Matters: SOE Board Edition

This news should not come as a surprise to anyone, but it is worth highlighting all the same.  South Africa’s Business Day reports that:

The boards of state-owned enterprises consistently underperform those of listed and large private companies, says a new benchmark study by the Institute of Directors of Southern Africa.

The study blames the fact that skills and expertise are not the main criteria in appointments to state-owned enterprises. The lines of accountability are often confused, when managers see themselves as accountable to the minister rather than the board, and the high turnover of ministers and directors means board members lack understanding of the industry in which they function.

Corporate governance has been an increasingly hot topic in the past few years.  State-owned corporations can experience all the governance problems that privately held corporations suffer from, but may also have to contend with more direct political manipulation and also typically lack powerful, independent shareholder constituencies that can serve as a check on wasteful managerial activities.  For SOEs, strong governance structures–including those that ensure qualified, independently minded directors–matter a great deal.






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