Managing State-Owned Enterprises

Abstract

Focuses on the concern governments have over the performance of their state-owned enterprises (SOEs) and discusses how to enhance efficiency by setting attainable objectives, reducing undue interference, holding management accountable for results, designing a framework of incentives, and developing a team of managers with appropriate skills. SOEs are expected to contribute to the broader goals of government policy and expand employment, but where noncommercial achievements are expected, a government can judge the net gain to society only by setting explicit goals and calculating their costs and benefits. SOE autonomy should be counterbalanced by central control, but to reduce arbitrary intervention by government, countries have devised institutional arrangements keeping government at arms length. Reform to correct weaknesses of SOEs should include: (1) attainable objectives; (2) instructions to maximize profits; (3) shadow pricing; (4) negotiated agreements; (5) holding managers responsible; (6) systems for monitoring and evaluating performance; (7) managerial incentives; and (8) liquidation of nonviable enterprises.

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