Financial Crime World

Government’s Role in Corporate Governance of State Enterprises

The government plays a significant role in ensuring effective corporate governance of state enterprises, which are crucial components of the country’s economy. As mandated by law, the government is responsible for various aspects of corporate governance, including:

  • Endorsing chairpersons and board directors
  • Reviewing remuneration structures
  • Approving foreign collaborations and equity participation
  • Providing directives to state enterprises

Ministry of Finance’s Role

The Ministry of Finance plays a vital role in ensuring effective corporate governance of state enterprises. As the custodian of the government’s shares, the ministry is responsible for:

  • Ensuring state enterprises function in line with their purpose of establishment and recommending any changes thereto
  • Attending general shareholder meetings
  • Exercising voting rights
  • Establishing clear remuneration guidelines
  • Fixing sitting fees of the board
  • Monitoring the performance of state enterprises

Portfolio Ministry’s Role

The Portfolio Ministry is responsible for ensuring that state enterprises are in line with their purpose of establishment and recommending any changes thereto. The ministry also:

  • Provides technical expertise and assistance wherever necessary
  • Consults with the Ministry of Finance on policy interventions
  • Refrains from being involved in governance or day-to-day management decisions

Reporting by State Enterprises

State enterprises are required to submit annual performance reports within three months after the end of each financial year to the Ministry of Finance. The reports must include:

  • Material loss
  • Unauthorized expenditure
  • Irregular expenditure
  • Disciplinary steps taken
  • Other matters that may be prescribed by the Ministry of Finance

Board of Directors

The Board of Directors is the governing body of state enterprises and is responsible for governing the company as honest and competent stewards. The board comprises between three to nine directors, depending on factors such as:

  • Size of the state enterprise
  • Risk profile of the state enterprise
  • Areas of operation of the state enterprise

Corporate Governance Guidelines

These guidelines aim to ensure effective corporate governance of state enterprises by setting out roles and responsibilities of various stakeholders, including the government, Ministry of Finance, Portfolio Ministry, and state enterprises themselves. The guidelines cover:

  • Reporting requirements
  • Board composition
  • Other essential aspects of corporate governance

Enforcement of Guidelines

These guidelines shall be enforced by the Ministry of Finance in consultation with relevant stakeholders. Non-compliance with these guidelines may result in disciplinary action against offending state enterprises.

By implementing these guidelines, the government is committed to ensuring effective corporate governance of state enterprises, which are critical components of the country’s economy.