Typically, SOEs lag behind listed companies in disclosing information about operations, finances and management structure.

The basic standards for disclosure should be the same as those for listed companies. Often, though, even when SOEs are listed on the country or regional exchange, such requirements are not enforced. Does the company file annual and periodic financial statements? Are these audited? By whom? Are shareholders adequately informed and involved in annual meetings?

For an in-depth discussion of transparency and disclosure standards for SOEs, see “Guidelines on Corporate Governance of State-Owned Enterprises,” from Organization for Economic Coorperation and Development (OECD), page 16: http://bit.ly/IhYVXR

The Russian government-controlled oil company Transneft illustrated the difficulties shareholders can face when a state-controlled company refuses to disclose its operations. It took a shareholder activist, Alexey Navalny, to discover that even though the company cut dividends to shareholders by 75 percent from 2003 to 2009, it supposedly gave $112 million in charitable donations in 2009. (See Reporter’s Notebook, Chapter 3, for more on how Navalny pursued the company on behalf of shareholders.)

Navalny, despite lawsuits he filed, has so far been unable to force the company to provide a list of recipients for its donations. Transneft calls the information “confidential,” even though the charitable contributions came from the company’s profits.

The consequences of poor governance at SOEs can have far-reaching implications. Typically, they significantly underperform, thus depriving the public of benefits. Ultimately, journalists should ask whether the company has a sustainable business or must rely heavily on government subsidies.

To check on whether an SOE is complying with minimal disclosure, journalists should ask these questions:

• Is there a clear mandate with specific objectives set for the company, including company priorities, available on the company website?

• Are special benefits, such as low-cost loans, provided to the company detailed publicly?

• Are there special obligations (such as free travel for government officials on a state airline) that the company is obliged to provide? Are these disclosed? Are these obligations specifically identified?

• Is the process for nominating and choosing board members disclosed?

• Is the background of the directors and management available to the public? Do they have expertise related to the industry?