Developing a Corporate Governance Regime for State Owned Enterprises in Papua New Guinea
Matui, M. J. (2010). Developing a Corporate Governance Regime for State Owned Enterprises in Papua New Guinea (Thesis, Doctor of Philosophy (PhD)). University of Waikato, Hamilton, New Zealand. Retrieved from http://hdl.handle.net/10289/5169
Permanent Research Commons link: http://hdl.handle.net/10289/5169
Papua New Guinea (PNG) has a developing economy and the Government controls three quarters of it. Control, in a way, provides the Government with power to give effect to the aspirations of the people enshrined in the National Goals and Directive Principles. State Owned Enterprise (SOE) is one of the means that the Government utilizes to participate in the economy, particularly delivering goods and services to the people. SOEs are established as separate legal entities and intended to be independent of the government so that they can be efficient and/or profitable, replicating the private sector, in their role in production of goods and delivery of services. There is a principal and agent relationship in an SOE. On the one hand the government is a shareholder with multiple interests, including public interest considerations and on the other hand there is the management that is responsible for strategic decisions and operations, creating a principal and agent relationship. The important question in this relationship is to what extent the government, as principal, should be involved in the business and affairs of SOEs. The use of SOEs by government creates controversies. Since Independence in 1975, SOEs have been increasingly facing problems in corporate governance. Some of the problems identified in PNG include situations where procedures are not complied with in appointing and terminating directors and chief executive officers (CEOs), most of which end up in court; responsible ministers, directors or CEOs involved in self-interested activities; and appointment of political associates and family members as directors and managers who do not have skills, knowledge or experience. These are issues in corporate governance; however they are not looked at from that perspective because corporate governance is a new concept that has never been substantively discussed in PNG. Thus, this study examines and records the law and practice of corporate governance, and identifies deficiencies and ways in which the corporate governance regime in SOEs can be improved. Given the fact that corporate governance is a new phenomenon in PNG, the thesis made use of case study methodology. There were five SOEs selected for case studies. Two are under the category of statutory corporation and three under state company. These SOEs were selected for purposes of comparing and contrasting under their individual category and between the two categories. The data was collected through documents and semi – structured interviews. The participants in the interviews were senior managers, former and current directors and CEOs, and consumers of SOEs. The research found many flaws of corporate governance in SOEs. These flaws were the consequence of lack of understanding and appreciation of corporate governance. Further, they were the consequence of inconsistencies between different laws, between laws and the practice, and deficiencies in the laws. The result of the research suggests first that the Government controls SOEs and is involved in both operational and policy matters of SOEs. Second, boards of SOEs are ineffective. Nearly all directors are on a part-time basis and lack understanding of the business and affairs of SOEs and their own roles and responsibilities. Third, the role of public institutions such as Ombudsman Commission and Public Accounts Committee is unclear among the participants interviewed. Consequently, the Government that controls SOEs is not held to account for its conduct in relation to them. Finally, the majority of consumers from each SOEs interviewed, stated that the quality and efficiency of services in SOEs are poor. This can partly be related to lack of good corporate governance.
University of Waikato
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