Corporate Governance of State-Owned Enterprises

Uses survey results of 45 state-owned enterprises (SOEs) to assess the governance of SOEs in the water and electricity distribution sectors of Latin America and the Caribbean (LAC), emphasizing the need for a corporate structure that prevents political intervention, rewards performance, and is subject to public scrutiny. Governance of SOEs is measured through six indexes, with the Corporate Governance Index, the main index, an aggregate index based on the other five indexes (legal soundness, board competitiveness, professional management, performance orientation, and transparency and disclosure) plus a binary measure based on the listing of the company on the stock exchange. Results suggest that good corporate governance is associated with better performance and higher growth rates. Major pitfalls relate to performance orientation and the selection and composition of the board of directors. While governance design needs to take into consideration sector differences, accountability emerges as the main governance aspect of SOEs.