Government outlines its ownership steering policy – corporate social responsibility defined as the core value
The Government finalised its new ownership steering policy at the meeting of the Ministerial Committee on Economic Policy held on 12 May 2016. The new Government Resolution on Ownership Steering Policy is to be adopted at the plenary session on Friday, 13 May.
“The vision declared in the Government Programme obliges us to use state ownership as a tool for active reform of Finnish society. Capital reserves need to be put to more efficient use, and current holdings need to be managed more actively. It’s imperative that we generate new economic activity in this country. Let’s put the balance sheets to work,” says Prime Minister Juha Sipilä who is also responsible for state ownership steering.
One area where there is potential for action by the State in its capacity as an owner and shareholder is the development of the platform economy. Investments in the platform economy may foster new private business and create opportunities for assuming a leading role in new areas. This, in turn, will contribute to the attainment of the Government’s long-term employment objectives.
Business development company as a tool for renewal
The market capitalisation of state-owned companies relative to the GDP is greater in Finland than any other country in Europe.
The Government’s new policy seeks to ensure that the corporate assets held by the State are put to more efficient use to boost economic growth and employment. As an owner and shareholder, the State should stake out evolutionary paths for the companies in which it holds interests in order to generate growth. To achieve this, it is proposed that a specific off-budget Business Development Company is established. This arrangement would make it possible to use the released capital reserves to generate new business, reinforce the capital base of the companies held in the development company’s portfolio and implement corporate restructuring schemes more efficiently.
Initially, the following holdings would be transferred to the Business Development Company: Altia Plc, Arctia Ltd (interests exceeding 50.1% of share capital), Ekokem Oy, Kemijoki Oy, Neste Corporation (interests exceeding 33.4%), Nordic Morning Plc, Posti Group Corporation (interests exceeding 50.1%), Raskone Ltd and Vapo Oy (interests exceeding 33.4%).
Parliamentary Advisory Council to support government ownership steering
The Government’s ownership policy involves a long-term approach that calls for a parliamentary commitment spanning several electoral periods. To ensure managed implementation and reinforce the role of Parliament in this context, it is proposed that a Parliamentary Advisory Council be established in the Prime Minister’s Office for this purpose. It would serve in an advisory capacity, reviewing the Government’s ownership policy, evaluating the general principles of ownership steering and more generally determining the limits of changes in government holdings for which parliamentary authorisations are required. The Advisory Council would not be consulted in relation to the actual business in which the individual companies are engaged.
Changes proposed to company-specific limits
The State has major holdings in companies deemed to involve a specific strategic interest. To safeguard these interests, the State has opted either to own the entire share capital of these companies (100%) or to retain a controlling interest (50.1%). The limits of ownership and adjustments to these limits are determined by Parliament. As it is, the Government proposes that the lower limit for securing strategic interests be reduced to 33.4%, which would make it possible to, among other things, veto any unwanted amendments to articles of association.
The Government will propose to Parliament the following amendments to the limits of ownership in connection with the second 2016 supplementary budget hearing: Gasum Corporation (0%->50.1%), Fingrid Oyj (0%->50.1%), Vapo Oy (50.1%->33.4%), Arctia Ltd (100%->50.1%), Neste Corporation (50.1%->33.4%), Posti Group Corporation (100%->50.1%) and Kemijoki Oy (50.1%->0%). The proposed limits of ownership are based on an assessment of the strategic importance of the companies.
At the same time, the ministries responsible for ownership steering in respect of the various state-owned companies were re-assessed. In addition to the newly established gaming and betting company, it is proposed that ownership steering in respect of the following companies will, in future, be exercised by the Prime Minister’s Office: Finavia Plc (previously Ministry of Transport and Communication), Finnpilot Pilotage Ltd (previously Ministry of Transport and Communication) and Finnish Aviation Academy Ltd (previously Ministry of Education and Culture). Additionally, it is proposed that responsibility for ownership steering in respect of Finrail Oy be reassigned from the Prime Minister’s office to the Ministry of Transport and Communication.
Corporate social responsibility as the core value of state-owned companies
Values provide the foundation on which all decision-making is based. State-owned companies need to set a moral example on corporate social responsibility. Underlying this concept is the idea that the success of a company is largely determined by the success of the community in which it operates.
In a global economy, it is of great importance that state-owned companies adopt a long-term view in their efforts to shore up their competitiveness. Corporate social responsibility is an integral part of sustainable competitiveness. For instance, it should be reflected in the principle that taxes are paid to the country in which the profits are earned. Minimisation of taxes through the use of tax havens is unacceptable. At the same time, efforts must be made to ensure the company’s capacity for renewal while taking proper care of the personnel.
Executive management and personnel of listed companies encouraged to increase share ownership
As a shareholder in listed companies, the State wishes to promote people’s capitalism by encouraging personnel to acquire shares in their employer companies. Similarly, the State urges the executives of listed companies to personally invest in the equities of the companies that they manage, for example in connection with recruitment and otherwise. This is a way of demonstrating commitment, an entrepreneurial spirit and confidence in the company’s growth and development.
Executive severance packages to be slashed
It is proposed that the severance packages offered to executives on termination of employment be halved. In the State’s view, future executive contracts of employment to be concluded by listed companies and comparable unlisted companies should not specify levels of compensation where the pay for the notice period and the severance package combined exceeds the regular 12 months’ pay.
Inquiries: Markus Lahtinen, Special Advisor to the Prime Minister (Economic Policy), tel. +358 295 160 404, and Eero Heliövaara, Director General, tel. +358 295 160 150, Prime Minister’s Office