Governments measure state-owned enterprises (SOEs) against the purposes for which they are owned—not by profitability alone. A sound system starts with a clear mandate, turns it into financial, operational, public-service, risk and sustainability expectations, and then uses reliable reporting, suitable comparisons, capable boards and public accountability to improve results.
The OECD’s Guidelines on Corporate Governance of State-Owned Enterprises 2024, published on 28 October 2024, offers an international governance framework for this work. It is guidance, not a universal scorecard: domestic law, sector conditions, ownership arrangements and each enterprise’s obligations shape how it should be applied.
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Start with why the state owns the enterprise
A performance target only makes sense when it is tied to an explicit purpose. An SOE might provide a public service, operate a natural monopoly, support a strategic sector, or combine public value with commercial returns. The state-owner should define the rationale for each enterprise, disclose relevant public-policy objectives and periodically review whether the rationale still holds.
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The OECD states that “The ultimate purpose of state ownership of enterprises should be to maximise long-term value for society, in an efficient and sustainable manner.” That principle calls for governments to set out an ownership policy: why the state owns enterprises, what outcomes it expects, how it exercises ownership rights and which public bodies are responsible.
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Where objectives can conflict—such as commercial returns, affordable service, investment, sustainability or employment—the owner should make priorities and trade-offs clear. Otherwise, an enterprise can be judged against expectations that were never reconciled or communicated.
Use a balanced set of measures
The government acting as owner should communicate broad expectations, including financial targets, capital-structure objectives, risk tolerance and sustainability expectations. More specific expectations may cover operations, public-policy goals and public-service obligations. The measures should fit the mandate; there is no single index that can fairly rank every SOE.
| Performance dimension | What it helps answer | Possible measures |
|---|---|---|
| Financial | Is the enterprise financially sustainable and using public capital responsibly? | Profitability, rate of return, dividends, debt, cash flow, investment, capital structure, return on equity or assets |
| Operational | How well does it turn resources into outputs and reliable service? | Output, service quality, reliability, access, productivity, and efficient use of labour, assets and capital |
| Public-policy and service obligations | Were mandated services or outcomes delivered, and at what cost? | Delivery against specified public objectives; costs and funding of public-service obligations |
| Risk and resilience | What could threaten the enterprise, public finances or continuity of service? | Risk exposures and material risks, considered alongside the enterprise’s stated risk tolerance |
| Sustainability and other non-financial outcomes | Is the enterprise addressing material long-term objectives as part of its strategy? | Measures linked to the state’s sustainability goals and the enterprise’s material objectives |
A measure should have a defined scope, a credible data source and a connection to an agreed objective. For example, reporting a financial return without identifying required service obligations can obscure the cost of the mandate; reporting service outputs without their cost can obscure resource efficiency. The aim is to make both sides visible, not to collapse unlike outcomes into one score.
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Build reporting that supports timely oversight
Ownership entities need timely information that gives a credible picture of financial and operational performance. Reporting systems should support continuous monitoring, governance oversight and selective, timely intervention—not merely produce an annual result after problems have accumulated.
The information should also help relevant government bodies identify fiscal risks, particularly where an enterprise receives substantial state support or is systemically important. The owner needs people with accounting and audit competence to interpret reports, engage with enterprise finance teams and internal and external auditors, and coordinate with state controllers where applicable. SOEs also need adequate internal controls, ethics and compliance measures.
Digital reporting can make regular monitoring easier, but it cannot compensate for unreliable data, poorly chosen targets or insufficient institutional expertise. If reported performance is surprising, the first questions are whether the underlying information is sound and whether the target still reflects the mandate.
Benchmark peers without mistaking comparison for a verdict
Comparisons can reveal opportunities to improve productivity and the efficient use of labour, assets and capital, especially where an SOE does not face competition. Governments may compare it with public or private organizations in the same country or abroad.
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A whole-enterprise comparison is useful only when the organizations are meaningfully comparable. Different mandates, service obligations, market conditions or public support can make headline figures misleading. If no close peer exists, compare selected functions, operations or performance elements instead. A benchmark is a diagnostic tool: it can prompt questions about a gap, but it does not by itself explain the gap or establish what the enterprise ought to achieve.
Give the owner and the board distinct responsibilities
The state-owner establishes the mandate and broad expectations; the board governs the enterprise within that framework. OECD guidance assigns boards responsibility for approving or formulating strategy, setting performance indicators, identifying and managing risks, overseeing disclosure and internal controls, assessing management, and deciding on CEO remuneration and succession arrangements.
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Transparent, merit-based board nominations and clear divisions of responsibility support accountability. The owner should monitor outcomes without taking over routine operating decisions assigned to the board. If targets are unclear, the owner can clarify them; if results expose inefficiency, control weaknesses or unmanaged risks, the board and management should respond within their responsibilities. Expectations may also need revision when the public mandate or relevant evidence changes.
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Enterprise reporting should disclose key performance indicators and explain how objectives were fulfilled, including how public-policy objectives were achieved. Relevant disclosure includes financial and operating results, the costs and funding of public-service obligations, state assistance and guarantees, and other material risks.
Governments can also publish an annual aggregate report on the SOE portfolio. That gives legislatures and the public a view of performance over time across enterprises, rather than leaving accountability to scattered company-level disclosures. Transparency about state support matters because operating results alone do not show the public sector’s full exposure.
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Integrate sustainability into expectations and oversight
Where the state has sustainability goals, OECD guidance recommends integrating them into ownership policy and practices, communicating them through dialogue with boards, and assessing and reporting progress regularly. Boards should consider material sustainability objectives in strategy, include sustainability considerations in risk and control systems, and take them into account when assessing management performance.
For those outcomes to be useful in oversight, reporting should be consistent, comparable and reliable. Sustainability measures should be material to the enterprise and linked to communicated objectives, rather than treated as a separate reporting exercise with no bearing on decisions.
What makes the framework work
- Mandate alignment: Targets reflect the reason for ownership and the enterprise’s public-service obligations as well as financial objectives.
- Comparable evidence: Peer comparisons account for differences in mandate and operating conditions; selected functions are compared when whole-enterprise peers are unsuitable.
- Accountability with autonomy: The owner sets expectations and monitors outcomes while the board remains responsible for enterprise governance and operations.
- Transparency about exposure: Reporting covers results, public support, guarantees and material risks sufficiently for public and fiscal oversight.
- Long-term perspective: Measures consider investment, resilience and relevant sustainability objectives alongside near-term performance.
The OECD framework is normative guidance, not evidence that adopting a particular scorecard will automatically improve results. It provides no universal formula or fixed target set. Sound implementation depends on whether the measures fit the enterprise’s purpose and whether public authorities can act on credible evidence while respecting the board’s role.
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