Organizational Structure and Internal Corporate Governance The organizational structures of sovereign wealth funds in various countries are similar and are divided into the following three levels: Level 1: Government departments. In some small countries, the president and king are generally directly responsible for the management of sovereign wealth institutions, while in other countries
Depending on the nature of a sovereign wealth fund, the central bank or the Ministry of Finance is the competent authority.
The functions performed by government authorities generally include: nominating and appointing board members and chairman of the board of directors of sovereign wealth institutions; deciding whether to increase or decrease foreign exchange surpluses and fiscal surpluses to sovereign wealth funds; reviewing the financial reports of sovereign wealth funds, etc.
Government authorities generally do not interfere in the daily operating activities of sovereign wealth funds.
Level 2: Sovereign Wealth Funds Most sovereign wealth funds have established and improved corporate governance structures in accordance with the law and have highly independent boards of directors.
Among the board members, non-executive directors, who are composed of professionals from outside the government sector, often account for more than half of the board members.
The board of directors is responsible for formulating the company's overall investment strategy and investment portfolio, and evaluating the board's performance.
Most sovereign wealth fund boards also have specialized committees to support the board in playing a substantive role in auditing, risk management, remuneration and personnel appointments.
The management is appointed by the board of directors, is accountable to the board of directors, and is responsible for the company's daily operating decisions.
Level 3: Portfolio Functions or Subsidiaries Most sovereign wealth funds also set up independent subsidiaries to invest in different areas.
These subsidiaries have also established relatively standardized corporate governance structures, with relatively independent boards of directors and management.