A Comparative Analysis of the Corporate Governance of Public Enterprises in Singapore and Switzerland - The Case of SingTel and Swisscom Master Thesis submitted to the Center of Competence for Public Management University of Bern Supervised by Prof. Dr. Reto Steiner Center of Competence for Public Management Schanzeneckstrasse 1 CH-3001 Bern by Laura Oetterli Pfaffnau (LU) Matriculation Number 08-714-198 Bern, July 7, 2014 A Comparative Analysis of the Corporate Governance of Public Enterprises in Singapore and Switzerland 7 Management Summary Management Summary This master thesis attempts to explain the different ownership structures of public enterprises from the perspective of corporate governance. The experiences of government-owned and government-linked companies are examined on the example of the two small but worldwide most competitive economies Switzerland and Singapore, which governments run a different strategy when it comes to state intervention. While state-owned-enterprises are established through the government (Boundless, 2013) and the entities’ assets are wholly or through majority shareholding owned by the public authority (Basu, 2009), the ownership structure of government-linked companies is much more complicated as the shares are held by a middle layer like a state-owned holding company (Ramìrez & Tan, 2003). However, scholars found no proof that the management or financial performance of these companies is different from private enterprises. In addition to the literature about public enterprises, there is a discussion going on about corporate governance, its principal-agent problems and its development in the public sector. Hence, it becomes clear that public corporate governance differs from the corporate governance in the private sector not least because of the different ownership situation this raises the question about the ownership structure’s influence on the entrepreneurial behavior of the public enterprises. Using a wide range of literature from the study fields of political and economical science, this thesis discusses the contextual difference between Switzerland and Singapore concerning their history, political situation, political economy and state-owned-enterprises situation. Both countries are owners of successful companies but run a different strategy when it comes to the ownership structure. Considering this difference, the study addresses the questions whether the ownership structure of one company would fit to the other and vice versa. After having gained an overview of the public corporate governance situation in Singapore and Switzerland, the study uses a qualitative research method based on a documentary analysis to conduct a case study. In this case study the two state-owned telecommunications companies SingTel and Swisscom are explored. The two public enterprises serve as examples of “best practice” concerning their management and financial performance in the respective country but are different concerning their ownership structure as well as the government’s influence when it comes to the business strategy. I A Comparative Analysis of the Corporate Governance of Public Enterprises in Singapore and Switzerland 7 Table of Contents Table of Contents Management Summary .................................................................................................................................. I Table of Contents ........................................................................................................................................... II List of Figures ................................................................................................................................................. V List of Tables ................................................................................................................................................... V List of Abbreviations ................................................................................................................................... VI 1. Introduction ............................................................................................................................................. 1 1.1 Initial Position, Problem Statement and Latest State of the Art ............................................................. 1 1.2 Aim of the Thesis, Research Questions and Delimitation ............................................................................ 3 1.3 Methodology ................................................................................................................................................................... 3 1.4 Structure of the Paper ................................................................................................................................................ 5 2. Conceptualization .................................................................................................................................. 8 2.1 State-Owned Enterprises vs. Government-Linked Companies .................................................................. 8 2.1.1 State-Owned enterprises ........................................................................................................................... 8 2.1.2 Government-Linked Companies .......................................................................................................... 11 2.2 Theoretical Framework .......................................................................................................................................... 14 2.2.1 Corporate Governance ............................................................................................................................. 14 2.2.2 Principal-Agent or Principal-Principal Perspective .................................................................... 15 2.2.3 Stewardship Theory .................................................................................................................................. 17 2.2.4 Public Corporate Governance ............................................................................................................... 18 2.3 Switzerland and Singapore at a Glance .......................................................................................................... 22 2.3.1 Republic of Singapore ............................................................................................................................... 22 2.3.1.1 Political System ..................................................................................................................................................... 23 2.3.1.2 Economical Situation .......................................................................................................................................... 24 2.3.1.3 SOEs in Singapore ................................................................................................................................................. 26 2.3.2 Swiss Confederation ................................................................................................................................. 30 2.3.2.1 Political System ..................................................................................................................................................... 31 2.3.2.2 Economical Situation .......................................................................................................................................... 33 2.3.2.3 SOEs in Switzerland ............................................................................................................................................. 35 2.4 Preliminary Summary ............................................................................................................................................. 37 II A Comparative Analysis of the Corporate Governance of Public Enterprises in Singapore and Switzerland 7 Table of Contents 3. Case Study .............................................................................................................................................. 39 3.1 Swisscom ....................................................................................................................................................................... 39 3.1.1 History ............................................................................................................................................................ 39 3.1.2 Ownership ..................................................................................................................................................... 41 3.1.3 Corporate Governance ............................................................................................................................. 42 3.1.3.1 Corporate Structure ............................................................................................................................................. 42 3.1.3.2 Board of Directors ................................................................................................................................................ 43 Composition of the Board of Directors ................................................................................................................. 43 Election of Board of Directors .................................................................................................................................. 44 Power and Duty of Board of Directors ................................................................................................................