# **<mark>Box 6</mark>**

# **<mark>The Cases of New Zealand and Sweden</mark>**

<mark>In New Zealand, the underlying rationale for the division of responsibilities between the Ministry of Finance on one hand, and the sector Ministries and the Advising Unit on the other hand (CCMAU, Crown Company Management Advisory Unit), is clearly articulated. The Ministry of Finance focuses on both economic efficiency and the fiscal impact of SOEs’ performance. Sector Ministries (through the Advising Unit CCMAU) adopt a commercially oriented perspective with a primary emphasis on ensuring that SOEs are successful companies. Therefore, through the CCMAU, sector Ministries take the lead in monitoring performance and have sole responsibility for Board composition. The Crown Company Monitoring Advisory Unit screens potential directors using clearly defined criteria, ensuring that the candidate’s skills match the needs of a specific SOE Board. Once an appointment has been made, the appointing ministers must certify in writing that the candidate is the best available and that there are no “unmanageable conflicts of interest.” The New Zealand model is based on a systematic evaluation of existing Boards. In view of the corporate strategy and the existing mix of competences and skills, competence and experience requirements are specified for new Board positions. Finally, candidates are systematically identified, interviewed and assessed based on profiles drawn up for each Board position.</mark> <mark>In the case of Sweden, uniform and common principles are applied in SOEs for a structured nomination process. The Board nomination process is coordinated by the Division for State Enterprises at the Ministry of Enterprise, Energy and Communications. A working group analyses the required competence on the basis of the company’s activities and situation and the composition of the respective Board. Recruitment requirements are then established and recruitment work initiated. Board members are selected from a broad basis for recruitment. When the process has been completed, nominations are to be published in accordance with the guidelines in the Code. This uniform and structured method of work ensures the quality of the nomination process as a whole. In order to be considered for a seat on the Board, a high level of general competence is required either within current business activities, business development, sector knowledge, financial issues or other relevant areas. In addition, a high level of integrity and the ability to see the best interests of the company are required. Every Board member should be able to make independent assessments of the company’s activities.</mark> _<mark>Source:</mark>_ <mark>OECD (2005) and Corporate Governance Guidelines for New Zealand and Sweden</mark> A few countries have also introduced nomination committees, but only for listed SOEs. These committees may exist at the company level or for all SOEs, and are to a certain extent based on the model of the UK’s Commissioner for Public Appointments. The government requires that the process be efficient, transparent and based on merit, excluding political activity and affiliation from selection criteria. Moreover, all stages are subject to audits. Such models have to some extent being also adopted by developing countries. South Africa’s King Report on Corporate Governance (2002), which is applied to listed companies but also to SOEs, requires formal and transparent procedures for appointment of directors to the Board, assisted by the nomination committees. Legal transplants of corporate governance rules have not always been successful, though. For instance, the Chinese CSRC requires companies to submit a list of proposed independent director nominees and their qualifications. The CSRC is then to vet the nominees and indicate approval or disapproval within fifteen days. Candidates disapproved by the CSRC may not be independent directors, but may still be directors. The company's Board of Directors must report the CSRC's disapproval to shareholders at the meeting where the directors are to be elected. The CSRC can probably handle the workload in terms of processing paper. Local offices, which will handle the approval process and have fifteen days to vet nominees, have over 1200 staff members who could perform reviews, or about one per listed 9