The Effectiveness of Boards of Directors of State Owned Enterprises in Developing Countries
This paper aims to shed some new light on the conditions needed to ensure the effectiveness of Boards of Directors of state owned enterprises with a focus on infrastructure sectors. In the case of developing countries, empirical studies have found...
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Format: | Policy Research Working Paper |
Language: | English |
Published: |
World Bank, Washington, DC
2012
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Online Access: | http://documents.worldbank.org/curated/en/2008/03/9292611/effectiveness-boards-directors-state-owned-enterprises-developing-countries http://hdl.handle.net/10986/6508 |
Summary: | This paper aims to shed some new light
on the conditions needed to ensure the effectiveness of
Boards of Directors of state owned enterprises with a focus
on infrastructure sectors. In the case of developing
countries, empirical studies have found evidence of positive
links between the composition of the Board of Directors and
financial performance. Yet the lack of solid theoretical
foundations, and in some cases poor data availability, makes
the conclusions of most studies weak. Several policy
recommendations emerge from the review of the economic
literature and evidence from case studies. First, the
introduction of a sufficient number of independent directors
emerges as an important corporate governance milestone.
Empowering them to exercise effective monitoring of
management, however, may prove to be a formidable challenge
for of state owned enterprises. More attention to board
procedures, particularly related to the Board selection and
evaluation process, is essential, to produce the necessary
insulation of Boards from government interference. Ensuring
sufficient continuity of services to directors is
particularly crucial to improve corporate governance. In
addition, other factors that may reduce directors'
ability to monitor corporate activities, such as the age
profile and the number of Boards on which they sit, need to
be handled more carefully. |
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