Just as in other listed companies, SOEs should treat all shareholders equally. However, this is often not the case, and many stories in recent years about SOEs involve violation of minority shareholders’ rights.

One of the methods SOEs used to deprive minority share-holders of their assets, particularly in Russia and Eastern Europe during the early days of privatization, was called “tunneling.” This involves the transfer of resources from the company to individuals or entities they own, and can include anything from selling assets at bargain-basement prices to loan guarantees at far below market rates.

Tunneling can also be accomplished when controlling shareholders increase their own shares of a company by diluting the value of minority shares, or even simply outvoting minority shareholders.

Some post-Soviet privatizations are still making news: The Swiss federal prosecutor’s office recently charged six Czechs and a Belgian with money laundering and other charges for allegedly syphoning off company cash to allow themselves to take control of a Czech mining company in 1999.

A recent academic research paper raised the possibility that similar kinds of tunneling activities are taking place today in Chinese companies. In this case, researchers speculate that private controlling shareholders and owners, not the state, are behind the schemes.