Managing state-owned enterprises
Shirley, M. | PAS
This paper suggests ways to improve the efficiency of state-owned enterprises (SOEs) by examining the special circumstances and constraints that are common to them. These include confused and conflicting objectives; government intervention in operating decision; monopoly powers; and inefficient management. These problems are complex and resistant to change. Negotiated agreements between government and SOEs can be used to clarify objectives and set targets for both parties. Systems to monitor and evaluate performance take into account the special constraints placed on SOEs and adjust for distorted prices. Competition and better accountability to customers encourage efficiency. Incentives linked to performance help motivate top managers. Compensation and training can be geared toward creating a corps of competent managers with appropriate skills. Finally, governments are reducing the managerial and fiscal burden of SOEs through selective liquidation and divestiture.
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