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The role of boards in setting remuneration

It is very uncommon among SOE boards in OECD economies to have a role setting their own remuneration. The exceptions include Italy and Lithuania, where the board has a formal role in remuneration which in both cases this basically consists of making recommendations to the AGM. In Denmark, the Chair would have an informal discussion on remuneration with the Minister, prior to the AGM where remuneration would be set. Although the board may be conflicted in setting its own compensation, it is difficult for the State to be position to determine this amount; for this reason it is common place that the boards are consulted. Regardless, the decision should be made as transparent as possible and benchmarked according to practices in similar companies (including in the private sector). Pay should be within reason and in line with what the company can afford in addition to the remuneration philosophy applied at the executive management level (OECD, 2008).

Bibliography

OECD (2005), OECD Guidelines on Corporate Governance of State-Owned Enterprises, OECD Publishing, Paris, www.oecd.org/daf/ca/corporategovernanceofstate-ownedenterprises/ 34803211.pdf.

OECD (2008), Using the OECD Principles of Corporate Governance: A Boardroom Perspective, OECD Publishing, Paris, www.oecd.org/daf/ca/corporategovernanceprinciples/ 40823806.pdf.

OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, http://dx.doi.org/10.1787/9789264119529-en.

Boards of Directors of State-Owned Enterprises: An Overview of National Practices © OECD 2013

 
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