Transcript Document

Corporate Leadership and Strategic
Management Programs for
Mongolian SOEs
4TH ANNUAL CORPORATE GOVERNANCE FORUM
Ulaanbaatar, Mongolia
by
Dr. Demir Yener
USAID/EPRC Senior Finance and Corporate Governance Advisor
June 13, 2011
Agenda
• OECD Principles of Corporate Governance for SOEs
• Best practices in implementing Corporate Governance at
Mongolian SOEs and recommendations for reform
• Design, development and implementation of Balanced
Scorecard strategic management tool for 3 pilot SOEs
• Design of CGRI for Mongolian SOEs
• International Examples on CG reforms, specifically the
Khazanah Nasional Experience in Malaysia
• Conclusive remarks on lessons learned
CG at Mongolian SOEs
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SPC Pilot Program on Corporate Governance and
Balanced Scorecard Implemented by EPRC
• In April 2010, EPRC responded to a joint request by SPC, the
Ministry of Finance and the Ministry of Mining and Mineral
Resources to design and develop a program to assist the
GoM in improving CG at Mongolian SOEs.
• Developed a Balanced Scorecard program, which was
delivered to 3 pilot companies (CRETG; UBEDN & DMP).
• Developed and administered a CGRI.
• Reviewed and commented on SOE corporate documentation
• Developed a:
– DRAFT CG Code for Mongolian SOEs based on the OECD guidelines.
CG at
Mongolian
3
– DRAFT CG Regulations for
SOEs
to SOEs
be implemented by SPC
OECD CG Guidelines for SOEs (2005)
1. Legal and Regulatory Framework:
–
Ensure a level playing field in markets where state owned enterprises and private
firms compete
2. State Acting as Owner:
–
The state should be an informed and active owner and establish a clear and
consistent ownership policy
3. Equitable Treatment of Shareholders:
–
The state and SOEs should recognize the rights of all shareholders
4. Stakeholders:
–
The state policy should recognize the SOEs responsibilities to all stakeholders
5. Transparency and Disclosure:
–
SOEs should observe high standards of transparency
6. Boards:
–
The SOE boards should have the necessary authority, competence and objectivity
to carry out strategic guidance and monitoring of management
4
CG at Mongolian SOEs
World Bank Mongolia ROSC CG Assessment (2009)
#
Category
I.
Effective CG Framework
Partially Implemented
II.
Shareholders rights and key ownership
functions
Partially Implemented
III.
Equitable Treatment of Shareholders
Broadly Implemented
IV.
Role of Stakeholders in Corporate
Governance
Partially Implemented
V.
Disclosure and Transparency
Partially Implemented
VI.
Responsibilities of the Board
Partially Implemented
CG at Mongolian SOEs
Assessment
5
OECD Principles Essential Criteria Applied on
Mongolia ROSC
Assessment Criteria
Explanation
Fully implemented
Most of the OECD Principles essential
criteria are met
Broadly implemented
One or more of essential criteria are less
than fully implemented
Partially implemented
Part of the essential criteria are met
Not implemented
Assessment is likely where major
shortcoming exist
Not applicable
Range (%)
95 % >
75 – 94.5 %
35 – 75.9 %
< 35 %
Assessment is only applicable where an
OECD principle does not apply due to
structural legal or institutional features.
CG at Mongolian SOEs
n/a
6
OBSERVATIONS REGARDING
SOE’S
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Global Best Practice Objectives of SOEs
• To be at least as profitable and efficient as
comparable private sector enterprises
• To use progressive employment practices
• To be socially responsible corporate citizens
• To create sustainable value for the society
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Legal and Regulatory Frameworks on State Ownership
• Law on Management and Financing of Budgetary
Institutions (LMFBI)
• Law on State and Local Property (LSLP)
• Decree of State Property Committee
• Department of State Property Management and
Privatization
• Department of Monitoring, Registration, and
Procurement
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Mongolian Laws and
Regulations
OECD Guidelines on CG of
State-owned Enterprises
Law on Management and Financing of Budgetary
Institutions: Article 22.1
“Minister of Finance controls finances of SOEs and SPC
controls work performance”
Chapter 1.B: effective Legal and Regulatory
Environment
“Government should strive to simplify and streamline the
operations practices and the legal form under which
SOEs operate”
Law on Management and Financing of Budgetary
Institutions: Article: Article 30.1
The CEO to list all procurements expenses and supplier
Chapter 2. B: State as an Owner
The government should not be involved in the day-today management of SOEs and allow them full
operational autonomy to achieve their defined objectives
Law on State and Local Property (11.8)
“SPC is to take off accounts assets, review requests for
procurement and make procurement decisions”
Chapter 2.C: State as an Owner
The state should let SOE boards exercise their
responsibilities and respect their independence.
Law on State and Local Property (18.5)
“SOE administrative posts and total staff numbers will
be set by the SPC”
Chapter 2. B: State as an Owner
The government should not be involved in the day-today management of SOEs and allow them full
operational autonomy to achieve their defined objectives
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Principles for Operations and Regulation of SOEs
• Operational autonomy to implement policies
established by their boards of directors
• Competitive conditions comparable to private sector
enterprises in non-monopoly sectors
• The role of the Government in ownership of SOEs
separate from Government regulation
– SOEs shall not receive more favorable treatment than
private sector enterprises
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Responsibilities of SPC re SOEs
• SPC primary Government agency for oversight of
SOEs
– Voting shares of SOEs
– Appointment or election of members of BoDs
– Consultation with boards and ministries on annual
performance targets
– Monitoring implementation of performance targets
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Business Plans of SOEs
• Targets with respect to:
– Production of goods or services
– Product development
– Market development
– Human resource development
– Advancement in use of technology
– Productivity
– Composition of assets and liabilities
– Profitability
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SPC SOE monitoring unit
• Advise SPC on developing and implementing ownership policy with
respect to:
– Strategic direction of SOEs
– Annual business plans and performance targets
– Proposals to restructure particular SOEs
– Need for management contracts for particular SOEs
– Sale of shares in SOEs to other investors
– Monitor performance of SOEs against targets
– Performance of boards of directors of SOEs
– Conduct inspections of SOEs
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Effective Legal and Regulatory Framework
(OECD SOE CG Guidelines)
• Governments should strive to simplify and
streamline the operational practices and the
legal form under which SOEs operate
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State Acting as an Owner
(OECD CG Guidelines)
• The government should not be involved in the
day-to-day management of SOEs and allow
them full operational autonomy to achieve
their defined objectives
• The state should let SOE boards exercise
their responsibilities and respect their
independence
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State Oversight of SOEs
• Rules contain many inappropriate elements contrary to OECD
Principles
–
–
–
–
Top down, rigid approach
Little room for exercise of discretion
Suggests static versus dynamic business environment
Diffuses accountability among SPC, SPC departments, BoD, GB, SB,
COPA and ministries
• Impression…
–
–
–
–
Prevents expeditious actions
Not reflect understanding of business motivations
Discourages creative thinking
Discourages constructive dissent
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State Governance of SOEs
• Impression…
– Discourages leadership
– Discourages ambitious persons from SOEs
• Leaders have to develop their plan, adjust plan, not simply
implement plan determined by others
• “Leaders run to problems, not away”
• Excessive liability—direct and third party in SOE rules-discourages addressing problems
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RECOMMENDATIONS FOR
IMPROVING CORPORATE
GOVERNANCE OF
MONGOLIAN SOES
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I: Ensuring an Effective Legal and Regulatory
Framework for State-Owned Enterprises
1. Complete the corporatization process and
harmonize SOEs’ legal status in the economy.
2. Clarify and ensure effective separation between the
ownership function and regulation.
3. Make specific obligations and related costs
transparent
4. SOEs ought not have preferential access to stateowned banks and private financial institutions
5. Promote public debate on the corporate governance
of SOEs
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II: The State Acting as an Owner
1. Rationalize the state owned sector – which sectors
will the government retain state ownership?
2. Develop and disclose an ownership policy, ensure
accountability of ownership function
3. Ensure visibility, strength and consistency in the
exercise of the ownership function
4. Avoid interference in SOE management
5. Develop structured and transparent board
nomination process for SOE boards
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III: Equitable Treatment of Shareholders
1. Reinforce provisions protecting the rights of minority
shareholders in relevant laws and regulations
2. Increase the independence of SOE boards and
improve the transparency of their nomination
process.
3. Reinforce minority shareholders’ capacity to obtain
effective redress for the violation of their rights.
4. Support the development of minority shareholders
associations
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IV: Relations with Stakeholders
1. Reassess and develop a strategic approach relative
to stakeholder relations
2. Develop methods to allow and encourage
stakeholders to exercise their voice. (Develop
Alternate Dispute Resolution)
3. Encourage SOEs to report on stakeholder relations.
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V: Transparency and Disclosure
1. Clarify SOE objectives and make non-commercial ones
explicit.
2. Use state budget to cover the costs of non-commercial
objectives
3. Build up and publish relevant performance indicators.
4. Require large SOEs to be as transparent as listed
companies. Disclose consolidated reports on state
ownership
5. Actively monitor and benchmark SOE performance,
ensure that SOEs are subject to a robust audit system
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VI: The Responsibilities of Boards of SOEs
1. Clarify and reinforce SOE board mandates and functions.
2. Ensure that SOE boards are actively engaged in shaping
the strategy.
3. Require SOE boards to have nomination, remuneration
and governance committees
4. Increase competencies of SOE boards by requiring
certification training for SOE board members, including
induction training
5. Develop performance evaluation for SOE boards
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Corporate Leadership and Strategic
Management Programs for SOEs
IMPROVING SOE
PERFORMANCE
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1- CORPORATE LEADERSHIP
Corporate Governance Rating Index:
“What Gets Measured, Gets Done”
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Development of Corporate Governance Rating Index:
Different Services and Models
Corporate
First Report
Coverage
Governance Rating
Issued In
System
The Corporate
Library (TCL)
1750 (US)
2000
Intl Shareholder
Services CGQ
7,500 (US & Intl)
2001
Governance Metrics
International
1,625 (Intl)
2002
S&P
Deutsche Bank
Deminor Ratings
Categories
7
Undisclosed
8
61
7
600
Europe & US
1998
4
DJ EuroStoxx 50
2002
5
300+ ()
1998
4
CG at Mongolian SOEs
Variables
~100
Undisclosed
300
28
Categories Used in Designing Mongolian CGRI
Categories
1- Effective Legal and Regulatory Environment for CG
2- The State Acting as Owner: Shareholders
3- Equitable Treatment of All Shareholders
4- Stakeholders & Corporate Citizenship
5- Transparency and Disclosure
6- The Independence of Board of Directors
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Designing the CGRI for Mongolian SOEs
The EPRC Project Team designed a CGRI that is a
stand-alone index measuring the degree to which
SOEs comply with the OECD Guidelines on
Corporate Governance of State Owned Enterprises
based on:
1. The OECD Principles of Corporate Governance;
2. Other international corporate governance standards and
research;
3. Mongolian Company Law;
4. Mongolian “Code of Corporate Governance” (2007).
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Structure and Measurements of the SOE CGRI
Category
I.Effective Legal and Regulatory
Framework
II. The State acting as owner
# of Questions
14
Percent Weighting
10
33
10
III. Equitable treatment of
shareholders
IV.Relations with stakeholders
7
10
17
10
V. Transparency and Disclosure
41
30
VI. Responsibilities of the Boards
42
30
Total number
(questions)
154
100
of
measurements
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Selecting the Specific Measurements in the CGRI
The selection of the specific measurements within each
category was based upon four considerations:
1. the relevance of each variable to effective governance based on
internationally-recognized best practices of OECD in corporate
governance;
2. actual legal requirements pertaining to corporate governance that
now exist in Mongolia,
3. relevance to the SPC’s mission;
4. ease at both obtaining and evaluating compliance with the actual
measure.
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CGRI Scores Explained
Score
1 (lowest)
Rating
Explained
Disagree
Non-Compliant
2
Somewhat disagree
Less than Minimum
Compliance
3
Neutral
Minimally Compliant
4
Somewhat agree
Mostly Compliant
Agree
Fully compliant
5 (Best)
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Summary of CGRI Results
I
II
III
IV
V
VI
(10%)
(10%)
(10%)
(10%)
(30%)
(30%)
UB EDNC
.31
.35
.41
.28
.86
.88
3.09
DMP
.35
.42
.50
.38
.89
.86
3.40
CRETG
.22
.34
.39
.36
.82
.35
2.48
MSE
.38
.36
.50
.44
1.33
1.10
4.11
MONGOLROSTSV
ETMET
.39
.46
.50
.40
.86
.85
3.45
MONGOL POST
.34
.29
.27
.20
.61
1.09
2.81
GOV’T SERVC’S
.34
.32
.50
.42
1.00
1.21
3.80
NAT’L
DISPATCHERS
.24
.30
.27
.29
.78
.61
2.49
CEMENT LLC
.33
.38
.007
.45
1.03
.69
2.95
ORKHON AZZA
.18
CG at Mongolian
.27
.34 SOEs .32
1.24
.97
Company Name
(Percent Weight)
Total
CGRI
Score
34
3.32
II. THE GOVERNMENT AS SHAREHOLDER
6
4
2
0
Frequency
Frequency
Frequency
I. ENSURING AN EFFECTIVE
REGULATORY FRAMEWORK
10
8
6
4
2
0
Frequency
Average scores
Average scores
4
2
Frequency
5
4
3
2
1
0
Frequency
More
4.5
4
3.5
3
2.5
2
1.5
1
0
Frequency
IV. RELATIONS WITH STAKEHOLDERS
6
0.5
Frequency
III. EQUITABLE TREATMENT OF
SHAREHOLDERS
Average scores
Average scores
Average scores
VI. BOARD OF DIRECTORS RESPONSIBILITIES
Frequency
Frequency
5
More
4.5
4
3.5
3
2.5
2
1.5
1
6
4
2
0
0.5
Frequency
V. DISCLOSURE AND TRANSPARENCY
4
3
2
1
0
CG at Mongolian SOEs
Frequency
Average scores
35
Survey Findings: Perceptions Discussed
I.
Ensuring Effective Regulatory Framework (Avg. Freq. of 3.5)
–
II.
Minimally compliant to somewhat compliant environment. Needs improvements
State as a shareholder/owner (Avg. Freq. of 1)
–
III.
State is largely perceived as inadequate as owner, not compliant with rules at all.
Equitable treatment of shareholders (Avg. Freq. of 5)
–
IV.
Respondents perceive that the State is equitably treated by the SOE in full
compliance– a fair argument given the ownership status.
Relations with stakeholders (Avg. Freq. of 4)
–
V.
Perception is that the SOE treats the stakeholders in compliance with OECD rules
Disclosure and transparency (Avg. Freq. of 3)
–
VI.
The SOEs are minimally compliant with the rules of transparency. Needs
improvements
Board of directors responsibilities (Avg. Freq. of 3)
–
The directors responsibilities are not well understood and rules are minimally
complied with. Needs improvements.
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2- CORPORATE GOVERNANCE
TRAINING FOR SOE DIRECTORS
Understanding Agency Theory and
Information Asymmetries that cause
inefficiencies at the SOEs
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Curriculum for “CG Training for SOE Directors”
Target Audience:
This program is designed for corporate board
chairpeople, directors, independent directors,
company secretaries, senior executive officers and
top management of Mongolian state owned
companies and state owned enterprises.
Objective:
The course aims to build the capacity and skills of
current and future business leaders of state owned
economic entities in corporate governance.
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Curriculum for “CG Training for SOE Directors” (2)
Course description:
The program will provide the participants with
specialized knowledge in corporate governance
issues such as corporate leadership, long-term
strategy formulation, effectiveness of management
oversight, increasing effectiveness of the working
procedures of the board, director and executive
compensation, legal and regulatory frameworks and
information disclosure, conflict of interest, related
party transactions.
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Curriculum for “CG Training for SOE Directors” (3)
Learning outcome is to help understand:
• Global best practice knowledge in CG on OECD principles
• The role and importance of independent and non-executive
directors, director selection process,
• Agency Problem of separation of the role of CEO and the
board
• The value of board independence
• Role and responsibilities of the shareholders, the board of
directors and the executive management and other
stakeholders in governance.
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Curriculum for “CG Training for SOE Directors” (4)
Module 1: An Introduction to CG: Int’l and Mongolian Environment
Module 2: Internal Corporate Documentation
Module 3: State as Shareholder.
Module 4: The Board of Directors
Module 5: Role of Corporate Secretary
Module 6: Organizing and Managing Efficient Board Meetings
Module 7: Executive Management
Module 8: Strategy Formulation and the Role of the Board
Module 9: Financial Management for Non-Financial Directors
Module 10: Risk Management
Module 11: Corporate Social Responsibility
Module 12: Material Transactions: (Related Party Transactions, etc )
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3- IMPROVING OPERATIONAL
PERFORMANCE
Balanced Scorecard Method:
Strategic Management with Metrics
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Balanced Scorecard Program for SOEs
• The pilot project was intended to demonstrate how
effectively implemented balanced scorecard systems can
help an organization in many ways:
–
–
–
–
–
–
–
Increase focus on strategy and results instead of tasks;
Break down uncoordinated communication between departments;
Better understand and react to customer/client needs;
Improve organizational performance by measuring what matters;
Make better decisions using leading performance indicators
Help leaders budget time and resources more effectively;
Help leaders and employees prioritize the work they do.
• Program was designed to translate high level organizational
strategy into something that employees can understand and
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act upon in their daily operations
and activities.
Overview of Performance Measurement Systems
• A performance measurement system enables an enterprise to
plan, measure, and control its performance according to a predefined strategy. In short, it enables a business to achieve
desired results and to create shareholder value.
• The major performance measurement systems in use today are
profiled below (in order of global adoption) and include:
–
–
–
–
–
–
The Balanced Scorecard
Activity based costing
Economic value Added
Quality Management
Customer Value Analysis/Customer Relationship Management
Performance Prism
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What is the Balanced Scorecard?
• The balanced scorecard is a strategic planning and
management system that is used extensively in
business and industry, government, and nonprofit
organizations worldwide.
• The tool is used to align business activities to the
vision and strategy of the organization, improve
internal and external communications, and monitor
organization performance against strategic goals.
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What is the Balanced Scorecard?
Strategic
Management
System?
Performance
Measurement
System?
Communications
Tool?
Balanced
Scorecard
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The Balanced Scorecard Solves Fundamental Business
Issues
Critical Measures
• Financial
• Customers
• Internal
Processes
• Human
Resource Dev
Balanced
Scorecard
• Internal
communications
improved
• Key
Performance
Measures
developed
• Responsibilities
clarified
• Strategic
Objectives
• Action Plan
CG at Mongolian SOEs
Strategy
Implementation
• Get organized
for BSC
• Launch Change
Mgmt Prog.
• Communication
strategy
• Organization
Assessments
• Employee
development
• Increased
transparency
• Better
governance
47
The Balanced Scorecard Perspectives
Customers (Stakeholders) Perspective
To achieve our vision, how should we
appear to our customers?
(Objectives/Targets/Measures/Initiatives)
Financial Perspective
To succeed financially, how should we
appear to our shareholders?
(Objectives/Targets/Measures/Initiatives)
Vision and Strategy
Operations Perspective
To satisfy our shareholders and customers,
what business processes should we excel
at?
Learning and Growth (HR) Perspective
To achieve our vision, how should we
sustain our ability to change and improve?
(Objectives/Targets/Measures/Initiatives)
(Objectives/Targets/Measures/Initiatives)
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EPRC Balanced Scorecard Program: Process
• Formed BSC teams from employees drawn from a various areas of the
organization.
• The Strategic Management Teams: lead the process by providing
policy guidance, define major strategic elements, committing resources,
establishing schedules, and approve scorecard work.
• Four Strategic Theme Teams developed strategic objectives and
strategy maps for each strategic theme, as well as identified process
improvement and other scorecard ideas such as performance
measures and initiatives.
• A Communications Team developed BSC Communications Plan by
which all staff and stakeholders of the companies will be kept informed
• A Reporting Team developed new BSC Reporting Framework of BSC
performance measures and achievements against targets.
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Balanced Scorecard: The 8 Week Training Program
1- Introductory training for the company’ senior
management (20 sr. Staff from each company)
2- Establishment and initial training of the company’s 7
BSC implementation teams. (50 people)
3- Train the Trainer Course (for in-house company BSC
Champions) (22 people from 3 companies)
4- BSC implementation development workshop
Altogether 8 weeks of contact time.
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Sample Strategy Map for SPC SOEs
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Balanced Scorecard Program: Outcomes
• Senior managers developed capacity to implement the BSC methodology
• Developed a Corporate Strategy document plus draft strategic objectives
and strategy maps in each of their 4 major strategic areas.
• Implementation teams developed BSC performance measures and
targets associated with the achievement of their strategic objectives.
• A group of BSC ‘champions’ are capable of providing leadership in
designing and implementing the BSC methodology.
• Companies developed a number of performance measures and initiatives
• Companies will develop their BSC frameworks by June-July 2011
• The companies may require final assistance around this time (August
2011).
Concern: Participants expressed concern that their Board members or the SPC may not
support the implementation of the BSC methodology
.
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Balanced Scorecard Program: Recommendations
1. Hold a BSC training for SOE directors of the Boards
2. Establish BSC SOE Project as a long-term Mongolian Government project:
3. Establish clear objectives and targets for the BSC Project and a timetable for
implementation.
4. Finalize development and implementation of the BSC methodology in the initial 3
SOE’s during 2011, with full implementation of the methodology in those
companies from 1 January 2012.
5. Perform a formal evaluation of the success or otherwise of the pilot project
should follow at the end of 2012 and again in 2013.
6. Link the development and implementation of the BSC methodology in the
Mongolian public sector with the implementation of good Corporate Governance.
7. Establish a Mongolian BSC Institute to support the ongoing development and
implementation of the BSC methodology in Mongolia.
8. Develop a broader long-term plan for the implementation of the BSC
methodology and Corporate Governance across the Mongolian public sector.
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INTERNATIONAL EXAMPLES:
CORPORATE GOVERNANCE
REFORM FOR SOES
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International Examples:
State as Owner
Main Objective: Professionalization of monitoring
units
• New Zealand
– Crown Company Monitoring and Advisory Unit
• UK
– Shareholder Executive
• France
– Government Shareholding Agency
• Canada
– Crown Agencies Secretariat
• Malaysia
– Khazanah Nasional
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STATE AS OWNER:
THE KAZANAH NASIONAL HOLDING CO.
EXPERIENCE IN MALAYSIA
Source: OECD Corporate Governance Reforms at SOEs in Asia. 2010.
(www.khazanah.com.my)
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Evolution of Khazanah in Malaysia
Nationalization
• Adding Value to Malaysia’s National Resources
Corporatization
• Providing essential public services
Recapitalization and Restructuring
• Recovering from Asian financial Crisis
Financial Institutions Development
• Becoming internationally competitive
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The Malaysian SOE Transformation Program
Phase I: “Introduce Key Performance Indicators” (2004-05)
Key Performance Indicators (KPIs); performance contracts; performance-linked
compensation; and, changes in board and senior management composition introduced.
Phase II: “Generate Momentum” (2005-06).
Ten Initiatives were identified for launch and implementation across all GLCs. Seven
Reference Books on principles of CG reforms at SOEs published.
Phase III: “Materialize Tangible Results” (2007-10)
Tangible results from earlier periods are expected to materialize. During this time, the focus is
on long-term strategic planning.
Phase IV (Final): Efficient & Competitive SOEs (2010– on)
SOEs perform efficiently, profitably and competitively with private counterparts and the reform
at Mongolian SOEsis realized.
58
results andCGtransformation
Khazanah’s Role within the Gov’t of Malaysia
Developer of
Public Goods
Regulator
Financial
Provide public
goods, services,
infrastructure
Enabling and level
playing field
Some SOEs
majority gov’t
owned
Provide law and
order in economy
Protect public
interests
Sustainable value
creation
Enforcement
Fair competition,
management
capacity &
Financial KPIs for
measure
Socio-economic
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Reporting Structure of Khazanah
Government
(Prime Minister & Few
Ministries)
Government Linked
Investment Company
Government Linked
Companies
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What is Khazanah Nasional Berhad?
Background
•
•
•
•
Sovereign wealth fund of the Gov’t of Malaysia (Est. 1993).
Strategic investor in various new Malaysian sectors and markets
Has US$37.3 bil in Assets in 50 co.s in Dec. 2010. Was $16.9 Bil in 2004.
Investments in finance, telecom, media and communications, utilities, IT,
and transportation sectors in Government Linked Companies (GLCs)
Objective
• To promote economic growth and make strategic investments
• To contribute towards nation building.
Mandate
• To drive shareholder value creation, efficiency gains and enhance
corporate governance in companies controlled by the government,
CG at Mongolian SOEs
commonly known as Government-Linked
Companies, or GLCs.
61
Khazanah’s Main Mandate: Long-Term Nation Building
•
•
•
•
Legacy Investments
Transform GLCs
New Investments
Human capital
development
Create
Sustainable Value
Build Capacity
•
•
•
•
•
Talent
Social Capital
Financial capacity
Process
Infrastructure
• Integrity
• Diligence
• Teamwork and
Professionalism
• Respect
Core Values
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Khazanah’s 5 Pillar Terms Of Engagement Framework With
GLCs
Leadership
Strategy
Systems and
Controls
Industry
structure
Monitor and
empower
• Ensure professional, capable, experienced and appropriate
• Board of Directors
• Senior Management team
• Drive high-quality executable business strategy through the Board and
management
• Place key systems and controls to underwrite growth and value creation:
e.g. Governance, Risk management, Performance Management, Talent
management, Procurement, Internal Audit, investor relations
• Drive or influence how industry structures evolve through optimal
competitive environment and regulatory structure
• Leverage inter-company synergies
• Once the above in place, do not micro-manage
• Continuous monitoring of progress
• Empower
to carry out its job
CG at management
Mongolian SOEs
63
Khazanah Governance Framework
CG at Mongolian SOEs
Source: Khazanah Nasional: State As Owner: The Kazanah Nasional Holding Company Experience in Malaysia (May 2010)
64
Khazanah Main Initiatives
GLC
Transformation
Programs
Corporate
Social
Responsibility
Knowledge
Linkages with
Knowledge
Centers of
Excellence
Khazanah
Intiatives
CG at Mongolian SOEs
Human Capital
Development
Programs
65
Khazanah Nasional: Conclusion
• Effective and good governance is absolutely
fundamental.
• Khazanah continues to work within the existing
governance framework.
• All parties must play their roles and perform efficiently
and effectively.
• Having a specific program is very important
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66
OVERALL CONCLUSION
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67
Conclusion
•
•
•
•
•
•
•
EPRC responded to the request by the GoM of design and implement the
Corporate Leadership and Strategic Management Development Program.
EPRC conducted CGRI survey among SOEs. Avg. score was 3.4 out of 5
Balanced Scorecard exercises were conducted at three pilot SOEs,
including: Central and Regional Electric Transmission Grid; UB Electric
Distribution Co; and, Darhan Metallurgical Plant
These three companies have developed their annual strategic plans with
performance indicators to be submitted to the GoM, using the BSC tool.
With the CGRI, SOEs will have a dashboard to manage their operations
more efficiently, and SPC will be able to govern the SOEs more effectively.
Finally, the exercise will help strengthen CG and strategic management by
improving transparency; accountability; responsibility; and, fair and
equitable treatment of all stakeholders.
A set of recommendations for the need for sweeping reforms for
reorganizing the SOEs is provided.
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