State-owned enterprises (SOEs) operate in the majority of European countries. The advantages and disadvantages of their market operation have always been a debatable issue. States shape different policies and adopt contrastive decisions on their engagement in economic activity, participation in different sectors as well as on the rules related to these.
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In the presented paper, a state-owned enterprise is defined as a legal entity directly or indirectly controlled by the state in which the state owns 50 percent or more of the voting shares. For the purposes of this paper, municipality-owned enterprises do not fall within the definition of state-owned enterprises.
The Guidelines on Corporate Governance of State-Owned Enterprises by OECD provides that the state should define the rationales for owning an individual SOE. However, specific criteria that could be followed by policy-makers is not provided, stating that the ultimate purpose of state ownership of enterprises should be to maximize the value for society through an efficient allocation of resources.
At present, it is unclear if different states follow specific criteria in establishing whether the state may operate on the market. If no criteria exist, is the decision taken on a case-by-case basis? In addition, the market share of SOEs in different countries remains unknown.
Therefore, the presented case study provides a review of the rationales behind state ownership and the decisions to establish SOEs as well as delineates specific implications of these policies. In addition, the paper provides a review of policies and decisions, relating to the corporate management of SOEs in Bulgaria, Estonia, Lithuania, Poland, and Slovakia, focusing on the scope of state participation in economic activity throughout the last decade.
Based on twelve criteria, the first part of the paper provides a comparison of public and private businesses. The second part focuses on the rationales behind state participation in commercial activity and their implications. The third part provides reviews of corporate governance of state-owned enterprises in Bulgarian, Estonia, Lithuania, Poland, and Slovakia from 2007 to 2018.