tool to evaluate the fulfillment of good corporate governance practices in primarily state owned ... by IDB

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

Instructions: Evaluate the Level of your company in regards to each of the Attributes in the matrix, selecting one of the three response options for each question. To read the question, place the cursor over the numeral. ATTRIBUTES

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

CG PROGRESSION MATRIX FOR WATER AND SANITATION PU (Adapted from the Methodology of the IFC ÂŠ 2006, with authorization)

Degree of Progress Attributes

A. COMMITMENT TO CG

1. The enterprise has a legal status 1. The enterprise has an articulated and different from that of the Government, and public plan to improve its CG practices. the statutes are valid and legal. 2. The enterprise has a written set of CG 2. The enterprise is subject to the general policies that cover, at the very least, the business legislation and that of rights and treatment of shareholders, the corporations with respect to the role of the board of directors, shareholders' and creditors' rights. transparency, and disclosure. 3. The functions and attributions of different CG entities, such as Government, the GSM or equivalent, board of directors, and management, clearly defined in the statutes.

3. The enterprise periodically discloses its the CG or CCG policy to shareholders, the the degree in which CG practices are the effectively applied, and the extent to which are such practices correspond to the country's voluntary codes of good practices.

4. Neither the enterprise, nor its 4. The enterprise does not have any controlling owner, have regulatory regulatory functions. functions. 5.The enterprise intends to improve its CG 5. The enterprise's CG organs cannot practices. approve commitments to transfers, 6.The enterprise has a written code of subsidies, or deviation of assets in favor ethics, approved by the board, and a of owners, investors, or other interest designated official responsible for its groups. fulfillment.

CG PROGRESSION MATRIX FOR WATER AND SANITATION PU (Adapted from the Methodology of the IFC ÂŠ 2006, with authorization)

Degree of Progress

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

Attributes

1 1. The BD includes independent director.

least

2 one 1. The BD includes independent directors.

two

2. The BD has an audit committee with a majority of independent directors, that recommends the selection of external 2. The BD's role and processes are auditors to the GSM or equivalent, clearly defined and understood within and examines and approves reports of the outside the enterprise. external and internal auditors, follows the reports of state auditors and supervises the action taken in response to the recommendations of the auditors. 3. The BD meets periodically and observes the formalities of good practices (for example, an agenda, minutes, quorum, votes)

3. The positions of president of the BD (Chairman) and chief executive officer (CEO) are not held jointly by the same person.

4. The members of the BD have sufficient, adequate and timely information for analysis and deliberation allowing them to 4. The BD has the exclusive responsibility exercise their supervision, management of evaluating, appointing, and firing the and strategic planning functions manager or president. thoroughly for the development of the enterprise.

5. The Directors are required to be loyal to the enterprise, and accountable to all 5. Minority shareholders obtain effective shareholders, so that they not represent representation by means of accumulative only the interest of the shareholders that vote or similar mechanisms. nominated them.

6. The BD has a committee charged with selecting and nominating director candidates, to be appointed by the assembly, composed by a majority of independent directors.

6. The participation of the Government in the appointment of Directors is explicit 7. The presentation of candidates is and disclosed to the public. institutionalized and has transparent processes that guarantee the mix of adequate capabilities and skills allowing the BD to perform its functions of supervision.

CG PROGRESSION MATRIX FOR WATER AND SANITATION PU (Adapted from the Methodology of the IFC ÂŠ 2006, with authorization)

Degree of Progress

D. TRANSPARENCY AND DISCLOSURE

C. CONTROL ENVIRONMENT AND PROCESSES

Attributes

1. The enterprise has put in place an adequate system of internal controls and 1.The internal auditor and the internal internal auditing. control systems are consistent with 2. The internal auditor interacts regularly national regulations and the highest with the independent external auditor and quality standards. answers to the BD. 1. The enterprise prepares its financial statements in accordance with the national accounting standards and these are audited by an external, recognized, and independent institution.

1. The enterprise's financial statements are prepared or re-expressed according to international accounting standards, and are audited by independent and recognized auditing firms.

2. The enterprise's financial statements, 2. All information and communications along with its notes, are annually relevant to shareholders and investors are disclosed to the owners, investors, control published in the website on time. entities, and the public. 3. The enterprise holds its GSM or equivalent open to the public, even if all its capital is owned by the Government. 3. The enterprise explains to the public the tariff scheme being applyed, as well as its results in terms of water quality, investment plans, and the expected effects of such investments on services and tariffs.

4. The enterprise discloses in its yearly management report its ethics' code, the main measures for enforcing it, and the degree of fulfillment reached. 5. In addition to D.1.3., the enterprise has a segmented information system and an area devoted to handling community and costumer needs.

CG PROGRESSION MATRIX FOR WATER AND SANITATION PU (Adapted from the Methodology of the IFC ÂŠ 2006, with authorization)

Degree of Progress

E. TREATMENT OF MINORITY SHAREHOLDERS AND SECURITY HOLDERS

Attributes

1. The enterprise is a corporation with autonomous minority shareholders, different from mere state-facilitator partners. Or it is an ICSC with clear obligations relative to holders of securities issued by the enterprise.

1. Minority shareholders receive notifications and agendas of all shareholder's meetings, and are allowed to participate and vote. The process used to summon and hold shareholder's meetings gives reasonable access to all minority shareholders.

2. The enterprise treats equitably all shareholders of the same class and holders of securities, with respect to voting rights, subscription rights, and transfer rights.

2. The enterprise has clearly articulated compulsory policies regarding the treatment of minority shareholders when there are changes in control, such as privatizations, renationalization, or repossession by the state.

3. The shareholders or security holders have precise and timely information regarding the amount of all types of stocks and securities owned by the Government and other shareholders and important investors; or, alternatively, the public knows how control is exercised by the owning Government entity and what restrictions exist to protect holders of securities issued by the enterprise.

3. The annual report of the enterprise discloses the main risks for minority shareholders and state-related security holders, as majority shareholders or owners, and any difference between shareholders, voting rights, and the global equity of the enterprise.

4. The enterprise discloses thoroughly 4. All holders of securities issued by the and timely all transactions with the enterprise receive equal treatment in Government and its affiliates, other large relation to the disclosure of information. shareholders and their affiliates, and directors or executives. 5. The enterprise is publicly accountable to the GSM, or is an ICSC that discloses in its web page and in public sessions all the information and the adopted decisions made by the GSM.

5. All shareholder's agreements and decisions of similar scope, that may affect minority shareholders or security holders are disclosed thoroughly, precisely and on time.

CG PROGRESSION MATRIX FOR WATER AND SANITATION PU (Adapted from the Methodology of the IFC ÂŠ 2006, with authorization)

Degree of Progress Attributes

F. FINANCIAL DISCIPLINE

1. The costs derived from fulfilling the objectives of public policy (that is, non1. The enterprise's business and non- commercial objectives of the enterprise), business (public policy) objectives are are valued through internationally articulated and disclosed to the public. accepted accounting, financial, and economic techniques, and are disclosed separately in the financial statements. 2. The financial statements of the enterprise provide separate information 2. The costs and the sources of financing about the impact of any kind of are transparent. Government-granted benefits, such as concessional financing (including guarantees) for its commercial activities. 3. There exist current policies regarding 3. Bank financing is obtained through a capital structure and dividends, adequate competitive process. for the sector and oriented according to commercial criteria. 4. The enterprise has assured sustained income: it covers its costs of operation 4. There is a system in place for rating and maintenance with revenues from bonds, and the enterprise has issued tariffs, and the Government covers the corporate bonds. imbalance resulting from tariff policy through fiscal transfers. 5. The enterprise comprehensively applies the regulatory framework for tariffs, including periodic adjustments for inflation 5. The enterprise creates economic value or costs recognized by the regulator; or or has goals to reduce the destruction of alternatively, these are self-regulated with value over the short term and fulfills them. the goal of covering costs and reducing differences in tariffs with those of neighboring territories. 6. The enterprise restructures or disposes 6. The enterprise does not invest in of assets or investments that do not projects with negative NPV. generate economic value. ABBREVIATIONS BD: Board of Directors. CCG: Code of CG CEO: Chief Executive Officer of the enterprise (General Manager, Legal Representative, Managing Director, President CG: Corporate Governance Chairman: President of the Board of Directors Director: Member of the BD GSM: General Shareholders' Meeting ICSC: Industrial and Commercial State enterprise, or a enterprise legally created but not regulated by corporate law IDB: Inter-American Development Bank IFC: International Finance Corporation NPV: Net Present Value PUE: Public Utility Enterprise SOE State-Owned Enterprise

X FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED)

the IFC ÂŠ 2006, with authorization)

Consult the index of abbreviations below

Degree of Progress 3

1. The enterprise complies with all applicable recommendations of the voluntary code of good CG practices of the country (if one exists) 2. The board has a governance committee, with majority participation of independent directors.

3. The enterprise has designated an official charged with overseeing the 1. The enterprise is a national leader and development and fulfillment of the CG is among the global leaders of CG among State-Owned and Private Water and policies. Sanitation Entreprises.

4.The GSM and the board of directors are distinct bodies in their composition and functions.

5. The functions of ownership and regulation over the utility enterprise are exercised by distinct authorities.

X FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED)

the IFC ÂŠ 2006, with authorization)

Consult the index of abbreviations below

Degree of Progress 3 4 1. The audit committee is composed 1. The BD is composed by a majority of entirely of independent directors. independent directors.

2. A committee of the BD, composed exclusively of independent directors, must approve all material transactions with related parties.

3. A specialized committee of the BD handles technical issues, or possible conflicts of interest (such as acquisitions, compensation, and risk management.)

4. All the BD is elected annually; or alternatively, the terms of the independent directors do overlap with those representing the controlling state-owner 2. The contracting (if this function belongs (major, his delegates, etc.) to the BD), compensation, and nomination committees, are composed exclusively of independent directors. 5. The definition of independent director also entails political independence from the chief executive of the state entity in charge of the PUE. There are mechanisms to ensure that consumer representatives within the BD, when there are such, are held accountable for their participation.

6. The BD carries out an annual selfevaluation. There are mechanisms in place to allow directors to internally review the BD's performance.

X FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED)

the IFC ÂŠ 2006, with authorization)

Consult the index of abbreviations below

Degree of Progress 3

1.The enterprise's internal control and 1. The enterprise prepares and presents internal auditor satisfy the most its financial statements, complying with demanding international auditing the International Auditing Standards. standards.

1. The enterprise prepares and presents all of its financial statements in accordance with the IFRS or the US GAAP. 2. The enterprise publishes quarterly financial reports, broken down by business units, and with results per share. These practices go above and beyond the local list of Government requirements.

1. The financial and non-financial disclosure practices are consistent with 3. The summary of all contract's the highest international standards. information is disclosed to the public.

4. In addition to D.2.5., the enterprise carries out, at the very least, annual costumer satisfaction surveys, and takes the results into account in its action plans.

X FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED)

the IFC ÂŠ 2006, with authorization)

Consult the index of abbreviations below

Degree of Progress 3

1. The enterprise's history regarding 1. The enterprise has effective equitable treatment of shareholders shareholder voting mechanisms to protect corresponds with international market's minority shareholders. expectations.

2. Information that summarizes all transactions with related parties is disclosed to the public.

2. There are no special-type stocks (for example "golden shares") owned exclusively by the Government. 3. The state controlling entity is committed to avoid making decisions that a enterprise managed with business criteria would not have adopted.

X FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED)

the IFC ÂŠ 2006, with authorization)

Consult the index of abbreviations below

Degree of Progress 3

1. Subsidies are focused and clearly defined for the beneficiaries. The costs for 1. The enterprise's the enterprise, derived from fulfilling exclusively commercial. public policy objectives, are covered separately by the Government.

objectives

are

2. The enterprise has a compensation 2. The enterprise has its shares valued in system tied to performance and aligned the stock market. with its objectives.

3. In addition to F.1.5., F.1.6 and F.2.6. the enterprise has explicit goals for the creation of value over the medium term in 3. The enterprise has an optimum mix of its strategic plan, and fulfills them. Or the bond and bank financing. enterprise obtains market capitalization that exceeds the book value.

ABBREVIATIONS

Representative, Managing Director, President of the enterprise), whether or not a member of the BD.

created but not regulated by corporate law

CG PROGRESSION MATRIX FOR WATER AND SANITATION PUEs (PRIMARILY STATE-OWNED) Evaluation Form NAME:

DATE:

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 Question 1 2 3 4 5 6 1 2 3 4 5

2 Answer

6 C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

1 2 1 2 3 1 2 3 4 5 1 2 3 4 5 6

Question 1 2 3 4

3 Answer

Question 1 2 3 4

4 Answer

Question

1 2 3 4 5 6 7

1 2 3 4 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 6

1 2 3

4 1 2 3

1 2

COMMENTS

RESPONSE OPTIONS a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If it does not apply, leave the cell blank.

Answer

Click to calculate

DATA ENTRY

LEVEL 1

ATTRIBUTES

1 2 A. COMMITMENT TO CORPORATE 3 GOVERNANCE 4 5 6 1 2 B. STRUCTURE AND FUNCTIONING OF THE 3 BOARD OF DIRECTORS 4 5 6 1 C. CONTROL ENVIRONMENT AND PROCESSES 2 1 D. TRANSPARENCY AND DISCLOSURE 2 3 1 2 E. TREATMENT OF MINORITY 3 SHAREHOLDERS 4 5 1 2 3 F. FINANCIAL DISCIPLINE 4 5 6

NUMERICAL DATA a b c

Processed Surveys: PERCENTAGE DATA a #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

b #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

c #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Click to calculate

DATA ENTRY

LEVEL 2

1 2 A. COMMITMENT TO CORPORATE 3 GOVERNANCE 4 5 1 2 3 B. STRUCTURE AND FUNCTIONING OF THE 4 BOARD OF DIRECTORS 5 6 7

a #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

DATA 2 b #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

c #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

C. CONTROL ENVIRONMENT AND PROCESSES

#DIV/0!

1 2 D. TRANSPARENCY AND DISCLOSURE 3 4 5 1 2 E. TREATMENT OF MINORITY 3 SHAREHOLDERS 4 5 1 2 3 F. FINANCIAL DISCIPLINE 4 5 6

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

ATTRIBUTES

DATA 2 b c

Processed Surveys:

29 1 2 3 4 5 6 7 8 9 10 11 12

Click to calculate

DATA ENTRY

1 2 A. COMMITMENT TO CORPORATE 3 GOVERNANCE 4 5 1 2 B. STRUCTURE AND FUNCTIONING OF THE 3 BOARD OF DIRECTORS 4 5 6

DATA 3 b #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

c #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

C. CONTROL PROCESSES

#DIV/0!

1 2 D. TRANSPARENCY AND DISCLOSURE 3 4 1 E. TREATMENT OF MINORITY 2 SHAREHOLDERS 3 1 F. FINANCIAL DISCIPLINE 2 3

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

13 14 15 16 17 18 19 20 21 22

DATA 4 b

LEVEL 3

ENVIRONMENT

AND

ATTRIBUTES A. COMMITMENT GOVERNANCE

LEVEL 4

a #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

ATTRIBUTES

DATA 3 b c

Processed Surveys:

DATA 4 b c

22 1 2 3 4 5 6 7 8 9 10 11

CORPORATE

#DIV/0!

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

1 2

#DIV/0! #DIV/0!

2 3

C. CONTROL PROCESSES

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ENVIRONMENT

D. TRANSPARENCY AND DISCLOSURE E. TREATMENT OF MINORITY SHAREHOLDERS F. FINANCIAL DISCIPLINE

AND

RESPONSE OPTIONS a

Currently being implemented

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. Blank cells.

Traffic Light of the Process of Advancement in CG for Primarily State-Owned PUEs. Map for Evaluation and Action Plan Click to graph

Level 1

Level 2

Level 3

A. COMMITMENT TO CORPORATE GOVERNANCE

B. STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS

C. CONTROL ENVIRONMENT AND PROCESSES

D. TRANSPARENCY AND DISCLOSURE

E. TREATMENT OF MINORITY SHAREHOLDERS

F. FINANCIAL DISCIPLINE

Currently being implemented. Not currently being implemented, but will be next year. Not currently being implemented, and not a goal for next year. Blank cells.

Level 4

TOOL TO EVALUATE THE FULFILLMENT OF GOOD CORPORATE GOVERNANCE PRACTICES IN PRIMARILY STATE OWNED WATER AND SANITATION COMPANIES Note: macro tools of this file are disabled, please contact Jorge Ducci (jducci@iadb.org) or Martin Soulier Faure (msoulier@iadb.org) to request the macro enabled file.

USES This tool can be used in several ways: 1. The answer sheet can be filled out by different key agents of the PUE: representatives of the owners, board members, and high management executives. In this case, the tool is useful to determine the degree of subjective consensus around the advance in CG in a PUE. 2. The answer sheet can be filled out as the result of an external evaluation of a PUE's CG. Such results can be discussed with the PUE, focusing on practices marked in "yellow", which are those marked to be implemented along the following year. In this case, the tool is useful as an instrument to diagnose and negotiate an action plan. 3. The answer sheet can be processed for several comparable PUEs, given a valid attribute: similar size, from the same country, with a similar property structure, with identical legal nature, etc. In this case, the tool is useful to identify common advance factors or critical barriers to GC, and to identify why a PUE might be having a different CG outcome than others. It is also useful as a dialogue basis for nation-wide authorities.

INSTRUCTIONS 1. Familiarize yourself with the CG Progression Matrix for Primarily State-Owned Enterprises (SOE) . This matrix proposes four progressive levels of CG, in the rows, from left to right; and six main attributes or sets of CG practices and results. 2. The attributes organized vertically from top to bottom, arrange the following CG guidelines proposed by the OECD : A. Commitment to CG; B. Structure and functioning of the board of directors; C. Control environment and processes; D. Transparency and disclosure; E. Treatment of minority shareholders; and F. Financial discipline. 3. For each attribute, in each progress level, the Matrix includes one or more sets of practices or results, that need to be evaluated by the person filling out the answer sheet. Be sure to understand fully the meaning of each item. In case of doubt, ask the tool administrator. Ideally, the exercise should be preceded by a training session on the fundamental concepts and practices of CG, applicable to state-owned PUEs. It may also be convenient to keep key OECD documents handy for reference purposes.

4. Go to the tab labeled "Form." Scroll over the different cells in the Excel page: you will see all the Matrix items. When clicking on the right of each item, the three following response options will be displayed : a

Currently being implemented.

Not currently being implemented, but will be next year.

Not currently being implemented, and not a goal for next year. If the item does not apply, leave the cell blank.

TOOL TO EVALUATE THE FULFILLMENT OF GOOD CORPORATE GOVERNANCE PRACTICES IN PRIMARILY STATE OWNED WATER AND SANITATION COMPANIES 5. Now please go to the Excel worksheet you were assigned by the tool administrator and process the answer sheet, choosing a, b, or c for each cell, as you deem appropriate. Please choose from the suggested options (a,b, or c) as often as possible; blank cells will be reviewed to ensure that the corresponding practice does not effectively apply to the specific company being studied. 6. Let the administrator know when you have finished. He/she will execute the "graph" command and the tool will display a visual summary of the exercise, so that you can start discussing the new CG Action Plan.

TOOL TO EVALUATE THE FULFILLMENT OF GOOD CORPORATE GOVERNANCE PRACTICES IN PRIMARILY STATE OWNED WATER AND SANITATION COMPANIES NOTES FOR THE ADMINISTRATOR 1. Make sure that the macros are enabled before executing the tool to ensure proper functioning. If macros are disabled, close the book and open it again, choosing the enabling option. This option is usually displayed as a pop up window or as a "security warning" toolbar near the top of the page. You can also click on "Options," select "Enable content" and click "Accept".

2. Every time you need to insert a new sheet ("format"), do so before the red-colored tabs to avoid altering the macros. 3. To generate the results of the traffic light, once the forms have been filled out, go to the tab "Graph" and click the "Click to graph" button. 4. Don't forget to save each exercise with a different file name. This way you will keep the original instrument. 5. Once you have processed the matrix graph, review the questions with the most "blank" areas and make sure that the reasons for labeling them as "not applicable" are fully justified from the CG perspective.

NOTE The Progression Matrix for CG for SOE has been developed by the International Finance Corporation. IFC has authorized the IDB and the consultant for its use. Several modifications have been done to the corresponding format to adapt it to water and sanitation companies, and to the cases where the tool will be implemented. The Inter-American Development Bank owns the tool in its present form, that builds on the original concept of the IFC.