The presence of government-controlled business titans is largely unprecedented in history, bringing forward new questions about how their conduct can affect global markets. The OECD appears to be on the case, giving greater scrutiny to state-owned companies such as Gazprom. The Financial Times reports:
Angel Gurria, secretary-general, said state-owned enterprises were fast expanding beyond their home territories, buying up large shareholdings and companies. However, they were little understood, lacked transparency and often aroused suspicions in host states about their objectives. The initiative follows work done by the OECD on the emerging influence on global markets of private equity, hedge funds and sovereign wealth funds. Mr Gurria told international investors at the annual conference of the International Corporate Governance Network in Seoul these new investors played a positive role in capital markets and should not be treated differently from other investors through the creation of new laws or codes. But he highlighted the growing role of state-owned companies in global markets, which he said had “received less attention so far”.
“Only four years ago, the world’s 10 largest listed companies in terms of market value were private commercial entities domiciled in the US and Europe. Today, five of the top 10 publicly traded corporations are government controlled. Three of these are Chinese, including PetroChina. Another is Russian (Gazprom) and one Brazilian (Petrobras).”Partially state-owned enterprises, such as Electricité de France, Eni, Enel and the telecoms companies of Germany and France, are among the world’s 100 largest publicly traded companies.” These state-owned companies were becoming more important as they consolidated and expanded into other markets, he said.The OECD is also looking at government-owned corporate entities that are not traded on public exchanges.Mr Gurria said the OECD would tackle three main challenges: first, it would look at the lack of data on these enterprises and their role in economies. Second, it would examine the issue of efficiency and competitiveness. “Since many state-owned enterprises represent significant economic assets of the countries involved, we aim to provide guidance on how to reform them and make them more efficient,” said Mr Gurria.The third challenge was to address concerns about the motives of state-owned groups expanding overseas.Mr Gurria was unequivocal that the OECD would not support demands for reciprocity in the countries where these state-owned enterprises or sovereign wealth funds were based.Some European and US analysts argue that if western host countries are to treat sovereign wealth funds like any other market participant, the fund’s home country must be as open as the country in which it wants to invest.Others say this approach is protectionist. But Mr Gurria added: “In the light of the sovereign wealth funds debate, state-owned enterprises themselves should ensure that the corporate governance challenges arising from their international operations are properly addressed.”By applying high standards of transparency, accountability and other corporate governance measures, these groups could dispel many of the concerns of host governments and markets about the nature and impact of their operations, he said.