Governments measure state-owned enterprises (SOEs) by comparing results with a clearly stated mandate—not by relying on profit alone. A useful system combines financial, operational, public-service, risk and sustainability measures, backed by reliable reporting and independent board oversight. Governments improve performance by acting on that evidence while leaving day-to-day management to the enterprise’s board and executives.
Why an SOE’s mandate comes before its metrics
A performance figure is meaningful only in relation to what an enterprise is meant to do. An SOE might operate a natural monopoly, provide an essential service, support a strategic sector or pursue commercial returns alongside public objectives. Those purposes can pull in different directions: for example, lowering prices for customers may reduce short-term profits, while maintaining long-term investment may require retaining earnings rather than paying them out as dividends.
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The OECD’s Guidelines on Corporate Governance of State-Owned Enterprises 2024 frame the goal this way: “The ultimate purpose of state ownership of enterprises should be to maximise long-term value for society, in an efficient and sustainable manner.” The guidelines recommend that governments publish an ownership policy explaining why the state owns enterprises, how ownership rights are exercised and which public bodies are responsible. They also recommend defining and periodically reviewing the rationale for each SOE, including any public-policy objectives connected to its business.
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Before setting targets, the owner should make priorities clear when objectives conflict. Otherwise, managers may be judged against goals that were never reconciled—for instance, maximizing dividends while also expanding service access or financing major long-term investment.
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Use a balanced set of measures
The OECD does not prescribe a universal SOE score or index. Measures should reflect the individual enterprise’s mandate and should cover both the resources it uses and the results it is expected to deliver.
| Performance area | What it can show | Illustrative measures |
|---|---|---|
| Financial | Whether the enterprise is financially sustainable and uses public capital effectively | Profitability, return on equity or assets, cash flow, debt, capital structure, dividends and investment |
| Operational | How efficiently and reliably the enterprise delivers its activities | Output, productivity, service quality, reliability, access, and use of labour, assets and capital |
| Public-service and policy objectives | Whether mandated services or outcomes are being delivered, and at what cost | Delivery against specified service obligations, outcomes, and the costs and funding associated with them |
| Risk and resilience | Whether material risks are identified and managed, including risks to public finances | Risk exposure, control effectiveness, guarantees, state assistance and other material risks |
| Sustainability and other non-financial objectives | Whether relevant long-term environmental, social or other objectives are reflected in decisions and results | Indicators tied to the enterprise’s material sustainability objectives and ownership expectations |
Targets should be specific enough to guide decisions, but not so narrow that they reward one result at the expense of the mandate. A profitability target, for example, needs to be interpreted alongside any required service level, investment plan or public-service obligation. Governments should communicate broad financial targets, capital-structure objectives, risk tolerance and sustainability expectations, as well as relevant operational and non-financial expectations.
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Build reporting that can support action
Measures only help if the owner receives information that is timely, credible and consistent. Ownership entities—the government bodies exercising the state’s ownership role—need reporting systems that let them monitor performance continuously, oversee governance and intervene selectively when a material issue requires attention.
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The ownership entity also needs people with enough accounting and audit expertise to interpret reports and engage with enterprise finance teams, internal auditors and external auditors. SOEs 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 a lack of institutional capacity.
Monitoring should also make fiscal exposure visible. This matters particularly when an SOE receives substantial state support or is systemically important. Reporting on assistance, guarantees, liabilities and material risks helps governments identify potential pressure on public finances rather than treating enterprise results as separate from the state’s own exposure.
Benchmark peers carefully
Comparisons can reveal inefficiency, especially when an SOE does not face competition. Governments can compare it with public or private organizations at home or abroad, or benchmark selected functions and operating processes when no organization is comparable overall. Productivity and the efficient use of labour, assets and capital are useful areas to examine.
A benchmark is a diagnostic, not a complete verdict. Differences in mandates, market conditions, service obligations and state support can make headline comparisons misleading. If two enterprises face different requirements, an owner should explain those differences or compare only the functions that are genuinely alike.
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Improvement depends on a clear division of responsibilities. The state-owner sets the mandate and broad expectations; the board oversees the enterprise within that framework. The OECD assigns boards responsibility for strategy, performance indicators, risk management, disclosure and internal controls, as well as assessing management and deciding on CEO remuneration and succession arrangements.
| State-owner | Board |
|---|---|
| Explains the rationale for ownership and the enterprise’s public-policy objectives | Formulates or approves strategy within the stated mandate |
| Sets broad financial, operational, risk and sustainability expectations | Establishes performance indicators and oversees progress against them |
| Monitors results, public support and fiscal risks, and holds the board accountable | Identifies and manages risks, maintains controls and oversees disclosure |
| Respects the board’s responsibility for enterprise operations | Assesses management and makes CEO remuneration and succession decisions |
When results fall short, the response should match the problem shown by the evidence: clarify an ambiguous target, address operational inefficiency, strengthen controls or manage a newly identified risk. If the public mandate or relevant evidence changes, the owner may need to revise expectations. Transparent, merit-based board nominations and clear roles help make accountability credible without drawing government into routine operational decisions.
Publish results, including public obligations and sustainability
Public reporting allows legislatures and citizens to assess what an SOE achieved and what it cost. Enterprise disclosures should explain performance against key indicators and objectives, including how public-policy objectives were fulfilled. Relevant information can include 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 so portfolio performance can be viewed over time rather than through isolated company figures.
Where sustainability goals apply, they should be incorporated into ownership policy and communicated through dialogue with boards. Boards should consider material sustainability objectives in strategy, integrate relevant considerations into risk and control systems, and take them into account when assessing management. Regular reporting is more useful when the information is consistent, comparable and reliable.
What the OECD framework can—and cannot—establish
The OECD’s 2024 Guidelines are recommendations for governance, not proof that adopting a particular scorecard will automatically improve an SOE. They do not provide a single formula or universal target set. Domestic law, ownership arrangements, sector, market structure, service obligations, state support and each enterprise’s objectives all affect how the framework should be applied. The OECD publication page dates the guidelines to 28 October 2024.
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