Bucharest, 12 May 2015 - State owned-enterprises (SOEs) have a key role to play in creating public value. And while government ownership can bring advantages – it can also destroy value if best practices in ownership and management are not applied.

These are just some of the conclusions to come out of a new report – State-owned enterprises: Catalysts for public value creation? – which draws on the findings from a Pulse survey of 153 CEOs in January 2015, as well as PwC’s 18th Annual Global CEO Survey.

“SOEs are an influential and growing force globally. The proportion of SOEs among the Fortune Global 500 has grown from 9% in 2005 to 23% in 2014. And while SOEs face many of the same opportunities and threats as private companies, they have a different purpose, mission and objectives, which relate to some aspect of public service and social outcomes”, stated Daniel Anghel, Partner, Tax Consulting, Leader of the PwC Romania integrated services team for the public sector.

“The future SOE will need to be much more actively owned and managed if it is to deliver real public value, and avoid competing unfairly in markets where private and third sector enterprises can deliver more efficiently and effectively the goods and services that citizens need and want”, added Daniel Anghel.

“In addition, SOEs should not be purely evaluated on financial reports, but on how they contribute to societal value creation – taking an integrated and holistic view to include a wider range of impacts including human, social, environmental, intellectual and infrastructural as well as financial dimensions”, said Daniel Anghel.

Other findings include:

• State-backed enterprises have many similar concerns as their private sector counterparts. According to PwC’s 18th Annual Global CEO Survey, common top five concerns include over-regulation, the availability of key skills, government responses to fiscal deficit and debt burden and geopolitical uncertainty. But state-backed enterprise CEOs are more concerned about cyber threats (68%) than their private sector peers (60%).
• While state-backed CEOs are more confident about short term growth than their private sector peers, they continue to be less confident about growth over the next three years. This difference may hint at the tension that state-backed CEOs face in aiming to be commercially viable and competitive while also trying to fulfil non-commercial objectives, the latter often demanding trade-offs in terms of financial performance between the short and longer term.
• Digital technology has the potential to be a key enabler, offering the scope to deliver higher productivity and better outcomes while also reducing costs. 64% of state-backed CEOs surveyed in our Global CEO Survey said they are concerned about the speed of technological change (compared to 57% of non-state backed CEOs). At the same time, state backed CEOs see digital technology as creating most value in terms of operational efficiencies, data analytics and the customer experience.
• Our Pulse survey of 153 CEOs revealed that compared to 2010, a larger proportion of CEOs today believe that government ownership distorts competition in an industry and leads to political interference in the marketplace.

To truly become catalysts for sustainable public value creation, the report sets out four tests which the leaders of the SOE of the future – particularly the board of directors and the executive team – will need to meet:

• Clarity – Clear understanding of the purpose and objectives of the SOE and their role in delivering this
• Capacity – Time and resources to conduct their role well
• Capability – Required and relevant expertise and experience to steer and manage the SOE
• Commitment to integrity – Serving the citizen for the purpose of societal value creation

Notes

1. A full copy of ‘State-owned enterprises: Catalysts for public value creation?’ can be found at www.psrc.pwc.com. The research draws on the results of a Pulse survey of 153 CEOs in January 2015 on protectionism and government ownership, as well as PwC’s 18th Annual Global CEO Survey.

2. The Public Sector Research Centre (PSRC) is PwC’s online community for insight and research into the most pressing issues and challenges facing government and public sector organisations, today and in the future. The PSRC enables the collaborative exchange of ideas between policymakers, opinion formers, market experts, academics and practitioners internationally. Please visit: www.psrc.pwc.com

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