Richard WoodworthRichard Woodworth+44 20 7867 2621+44 20 7867 2621

richard_woodworth@ml.comrichard_woodworth@ml.com19 September 200019 September 2000

Reforming Swedish Reforming Swedish Government-Owned Government-Owned

CompaniesCompanies

Points to CoverPoints to Cover

1. Background to Policy Change

2. Assess Government’s Objectives

2. Assess Progress to Date

3. Is the Swedish Experience Applicable?

Background to GOC Policy ChangeBackground to GOC Policy Change

• Early 1990s Economic, Financial Problems

• EU Accession

• Globalization

• Information, Communications Technology

• OECD Privatization

• EMU and Industry Consolidation

• Knowledge Economy

Swedish Government ObjectivesSwedish Government Objectives

• Transparency

• Value Creation

• Accountability

• Flexibility

Means to Achieving ObjectivesMeans to Achieving Objectives

• Transparency

• Corporate Governance

• Capital Structure

• Incentives

• Internet

Greater TransparencyGreater Transparency

• Regular Quarterly, Annual Reports

• Increased Public Scrutiny, Expectations

More Focused Corporate GovernanceMore Focused Corporate Governance

• Set Guidelines for Directors

• Hire More Outside Directors

• Increase Accountability

Leaner Capital StructureLeaner Capital Structure

• Realize True Economic Cost of Capital

• Pay Dividends

• Borrow on Private Capital Market

Worker IncentivesWorker Incentives

• Offered to All Employees

• Determined Company by Company

• Manager Has Broad Discretion

Internet StrategyInternet Strategy

• Reduce Costs of Sales, Customer Support

• Purchase On-line

• Control Inventories

• Forecast Consumer Demand

Assessing the Progress to DateAssessing the Progress to Date

• Government Portfolio Large and Diverse

• Experience So Far Limited

• Scorecard:

– TransparencyTransparency AA

– Corporate GovernanceCorporate Governance [B][B]

– Capital StructureCapital Structure ??

– IncentivesIncentives ??

– Internet StrategyInternet Strategy ??

Is the Swedish Experience Applicable?Is the Swedish Experience Applicable?

• Sweden on Established Reform Path

• Strong Institutions

• Tradition of Openness

• Considerable ‘New Economy’ Potential