Sustainable growth through state ownership – Government adopts resolution on state ownership policy

On 23 May 2024, the Finnish Government issued a new resolution on ownership policy. It directs the State’s actions in its capacity as a shareholder and applies to all limited liability companies in which the State holds interests and to all ministries whose duties include ownership steering.

“The revised ownership policy takes account of the fact that companies are now operating in a changed geopolitical situation and facing increasingly challenging conditions. The basics are the same: State ownership policy is based on sustainable and professional management of the State’s corporate interests in ways that are appropriate and increase the value of state holdings in the long term,” says Minister for European Affairs and Ownership Steering Anders Adlercreutz.

Decision-making by the State in its capacity as a shareholder is based on the State Shareholdings and Ownership Steering Act and the Limited Liability Companies Act. Day-to-day ownership steering is based on the Corporate Governance Code of the Securities Market Association and on corporate governance recommendations. 

As a shareholder, the State aims for a long-term increase in shareholder value, predictable revenue from its corporate holdings and efficient implementation of the strategic interests and special assignments.

“The State has major corporate interests: it has holdings in 73 companies with a total value of approximately EUR 37 billion at the end of 2023. The state ownership policy needs a long-term approach, spanning several electoral periods, for exercising control over state-owned companies and for maintaining and increasing the value of state holdings.”

In line with the Government Programme, the ownership policy centres on risk management, safety, security, and competitive neutrality.

“It is important that the State respects the requirements of fair competition and ensures that its activities do not displace private ownership,” Minister Adlercreutz says.

Security of supply and risk management as priorities

As an owner, the State will allow for the geopolitical dimension and security of supply aspects from the Finnish perspective in ownership strategies for various companies and when determining societal interests. 

“Each company-specific ownership strategy gives due consideration to the principal owner risks and ensures the role of risk management in support of decision-making. Companies must consider how changes in the geopolitical situation affect their business activities and such matters as preparedness, risk management and protection of critical infrastructure,” Minister Adlercreutz says.

Like any other major shareholder, the State appoints its own representatives to the boards of directors of state-owned companies. However, public officials are proposed as board members in listed companies only in exceptional circumstances. 

Remuneration should be reasonable and transparent

The State is an active owner who has an ownership strategy for each of its holdings, showing the State’s objectives as an owner and the priorities and measures of ownership steering. As an owner, the State forms its own vision of each company’s financial and strategic objectives and reviews them regularly together with the board of directors.

From now on, all state-owned companies must define and make public their dividend policies where the capital structure is efficient and comparable to peer companies in the field and where the dividend stream is comparatively steady and predictable.

The State expects that companies have reasonable and transparent remuneration schemes and emphasises the importance of transparent criteria of variable remuneration in terms of remuneration reporting. Pay equality in accordance with the Equal Pay Directive is also an important aspect.

While the remuneration limits for non-listed companies are unchanged, the maximum limit for variable remuneration in listed companies will be raised from 120 per cent to 200 per cent.

“The maximum limits for performance-based remuneration in listed companies are well below the market level. State-owned companies must be able to recruit executives and staff on competitive terms,” Minister Adlercreutz says. 

Sustainability ensures growth of shareholder value

State ownership policy has been specified with respect to the sustainability expectations of the State owner, concerning for example climate and biodiversity. It also highlights companies’ responsibility for the climate and human rights impacts of their value chains. State-owned companies are expected to be at the forefront of corporate social sustainability because sustainability can boost competitiveness and grow shareholder value. 

“As an owner, we expect companies to integrate sustainability into their corporate strategies, business models and executive remuneration schemes. Companies must focus on promoting such sustainability objectives that serve their competitiveness,” Minister Adlercreutz says.

A new practice is introduced where the Ownership Steering Department regularly draws up a sustainability programme concerning state shareholdings. The programme defines the State’s sustainability objectives and the indicators it will use to monitor its own sustainability efforts and the effectiveness of its ownership steering.

Ownership restructuring during the government term

The investment programme outlined in the Government Programme will be funded for the most part through revenue generated by unincorporated state enterprises and through property income (i.e., dividends, capital refunds, sale of shares and other forms of corporate restructuring). 

“Ownership restructuring and the optimal ownership structures of state-owned companies will be carefully reviewed during the government term. Planning of ownership restructuring always considers the state of the companies and of the capital market,” Minister Adlercreutz says.

The State regularly assesses the capital structure of non-listed state-owned companies and liquidates any overcapitalisation.

As part of the drafting of its resolution on state ownership policy, the Government reviewed and specified the state ownership interests. It proposes the following lower limits of state interest for parliamentary authorisation: The lower limits of state interest in Finavia Corporation and VR-Group Plc will be reduced from 100 per cent to 50.1 per cent. The lower limits of state interest in Gasum Corporation and Posti Group Corporation will be reduced from 50.1 per cent to 33.4 per cent. The lower limit of state interest in A-Kruunu Oy will be reduced from 100 per cent to 0 per cent. The lower limit of state interest in Kemijoki Oy will be raised from 0 per cent to 33.4 per cent.

Inquiries: Maija Strandberg, Director General, Ownership Steering Department, Prime Minister’s Office, tel. +358 50 407 8423; Crista Grönroos, Special Adviser (requests for interviews with the Minister), tel. +358 50 441 4257