Story: State-owned enterprises

Page 3. Governance of state-owned enterprises

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State-Owned Enterprises Act

As well as being subject to the State-Owned Enterprises Act 1986, state-owned enterprises are registered as limited liability companies under the Companies Act 1993. The minister of finance and the minister for the relevant area hold all the shares in each state-owned enterprise. Except for the specific provisions of the State-Owned Enterprises Act, state-owned enterprises are governed by the same law as companies in the private sector. Each enterprise has a board of directors, appointed by the shareholding ministers, with the same obligations under the Companies Act as directors of private-sector companies.

The act says that the principal objectives of a state-owned enterprise are to:

  • be ‘as profitable and efficient as comparable businesses that are not owned by the Crown’
  • be ‘a good employer’
  • exhibit ‘a sense of social responsibility’.

The act also provides for the government to pay state-owned enterprises directly for any non-commercial services it wishes them to provide.

Powers rarely used

A senior executive from one state-owned enterprise outlined in 2006 how the relationship with the government worked in practice: ‘There’s a lot of informal contact with the government. The direct powers that the government has under the SOE Act, and others, to interact with us, are rarely if ever used.’1

Statement of corporate intent

The government’s control of state-owned enterprises is exercised through a document called a statement of corporate intent. The board of each state-owned enterprise prepares an annual draft statement of corporate intent for consultation with the shareholding ministers. The consultation covers, among other things, the types of business the enterprise engages in, the composition of its balance sheet, how the board will set its annual dividend, and any non-commercial objectives.

The shareholding ministers have the power, if required, to direct the board in writing on these matters. The agreed statement of corporate intent, including associated targets for performance for the next three years, is then tabled in Parliament. State-owned enterprises report to Parliament annually on their accounts and on their achievement of the objectives of the statement of corporate intent. The controller and auditor general audits their accounts.

A special unit of the Treasury, the Crown ownership monitoring unit, monitors and evaluates enterprise performance, advises the government on future policy for investment in each enterprise and its profit objectives, and assists with the appointment of directors by managing the process and advising on potential candidates.

Footnotes:
  1. Quoted in Belinda Luke, Strategic entrepreneurship in New Zealand’s state-owned enterprises: underlying elements and financial implications. PhD thesis, Auckland University of Technology, 2009, pp. 123–124, http://aut.researchgateway.ac.nz/bitstream/10292/658/4/LukeB.pdf Back
How to cite this page:

Rob Laking, 'State-owned enterprises - Governance of state-owned enterprises', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/state-owned-enterprises/page-3 (accessed 18 July 2019)

Story by Rob Laking, published 20 Jun 2012, updated 17 Feb 2015