International Journal of Public Sector Management

Corporate governance and accountability of state-owned enterprises: Relevance

for science and society and interdisciplinary research perspectives
Giuseppe Grossi Ulf Papenfuß Marie-Soleil Tremblay
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IJPSM GUEST EDITORIAL

28,4/5
Corporate governance and
accountability of state-owned
274 enterprises
Received 14 September 2015
Accepted 15 September 2015
Relevance for science and society and
interdisciplinary research perspectives
Giuseppe Grossi
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School of Health and Society, Kristianstad University, Kristianstad, Sweden

Ulf Papenfuß
Economics Department, University of Leipzig, Leipzig, Germany, and
Marie-Soleil Tremblay
École Nationale d’administration Publique, Québec City, Canada

Abstract
Purpose – The purpose of this paper is to introduce the special issue and outline its major themes and
challenges, their relevance and the research opportunities the field presents.
Design/methodology/approach – The paper reviews prior literature and outline’s the need to
analyse challenges for corporate governance and accountability of state-owned enterprises (SOEs) as a
precursor to introducing the contributions to this special issue.
Findings – Corporate governance, accounting and accountability of SOEs are crucial and growing
topics in public management and other research disciplines. Public service provision and budget
consolidation cannot be realized effectively and efficiently without powerful governance and
management of SOEs. However there are significant corporate governance challenges and important
empirical research gaps in comparison to other fields. Broader theoretical perspectives, methodological
approaches, accountability mechanisms and sector/context are identified and discussed and
encouraged in future research.
Research limitations/implications – This paper aims to stimulate interdisciplinary research on
emerging issues affecting governance and accountability of SOEs considering their growing importance
in the society and their changing nature.
Practical implications – Effective mechanisms and good practices may contribute to better
performance of SOEs. Findings may help politicians, administrations, board members, auditors,
consultants, scholars and the media striving for improvements around the world.
Originality/value – The paper condenses theoretical and empirical findings to highlight the relevance
of this field and important research gaps. The special issue offers an empirical examination of
interdisciplinary literature and innovative experiences of SOEs to strengthen public service motivation,
board composition and roles, trust and control, transparency, public value and to enhance the ability to
manage, steer and monitor contracts, performance and relationships.
Keywords Corporate governance, Accountability, SOEs
Paper type Viewpoint

International Journal of Public

Sector Management 1. Introduction
Vol. 28 No. 4/5, 2015
pp. 274-285
Reforms in the provision of public services with new institutional arrangements have
© Emerald Group Publishing Limited
0951-3558
made state-owned enterprises (SOEs) and their activities significantly increase in many
DOI 10.1108/IJPSM-09-2015-0166 countries over the past decades. They now represent approximately 10 per cent
 of global gross domestic product with joint sales of $3.5 trillion (Bruton et al., 2015). Corporate
For this reason, the field is important yet understudied. governance
While corporate governance and management deficits as well as a lack of
accountability have led to many discussions in this area, corporate governance of SOEs
and
continues to be a major challenge in many countries (OECD, 2005; Whincop, 2005; accountability
Bernier, 2015; Papenfuß, 2014; Bruton et al., 2015). There are continuing questions
about which models, mechanisms, instruments and processes public authorities and 275
SOE boards could use to promote the effective, efficient and sustainable provision of
public services (OECD, 2005; Florio and Fecher, 2011; Verhoest et al., 2012).
The collection of papers in this special issue has been drawn from papers and ideas
discussed in the EURAM-Mini-conference of the SIG on public management, which was
held at the University of Leipzig, Germany in February 2015 as well as an open call for
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papers. A wide range of actors play a role in highlighting the particular challenges
SOE’s face, however the definition of the field is still not the object of consensus.
Therefore seems crucial to set up a concept before moving forward.
As a reflection of the international diversity different terms are used for enterprises
and organizations in the course of the special issue: SOEs, municipal-owned enterprises,
government-owned companies, public enterprises, local corporations, government
business enterprises, government-sponsored enterprises, government corporations,
mixed-enterprises, indirect or direct holdings of the government, agencies Type 2 and 3
and other various combination of these elements. The term most often used by scholars
and practitioners however, is SOEs (e.g. Bruton et al., 2015; OECD, 2005; Aharoni, 1981;
PWC, 2015). In international discussions and for this special issue the OECD’s widely
used definition seems to circumscribe meaning in the most clear defined manner:
“enterprises where the state, regional governments or cities have significant control,
through full, majority, or significant minority ownership” (OECD, 2005; PWC, 2015).
The advantage of the term SOE is that it is intuitively easy to understand and
widely used by international organizations and academics. However, for example cities
are not “states”. If one uses the term and wants to capture different government levels,
one has to recognize the definition in a way that it also includes municipal-owned
enterprises and regional-owned enterprises.
If ownership exceeds the boundaries of the “state”, the notion of control also needs to
be addressed before we go forward. Public authorities may indirectly exercise a
dominant influence in organizations by virtue of their financial participation or the
rules, which govern it. Therefore a dominant influence on the part of public authorities
is also presumed when these authorities, directly or indirectly in relation to an
organization, hold the major part of the subscribed capital, control the majority of
the votes attached to shares issued by the SOE or can appoint more than half of the
members of the SOE managerial or supervisory body (European Commission, 2012)
regardless of their public or private legal form (van Thiel, 2012).
However, new forms of organizations are emerging and contribute to the growing
discussion between public management and administration scholars on state-owned
enterprises. Transformations have appeared and hybrid organizations are increasingly
present in the field. A hybrid organization is said to be market oriented. It operates in a
business-like manner to provide public services with public funding and is politically
governed (Thynne, 1994; Grossi and Thomasson, 2015). Hybrid organizations can
differ from one another in terms of financing, ownership and organizational structure,
and the differences can be explained by dissimilar purpose and history (Kickert, 2001;
Koppell, 2003).
 IJPSM This special issue recognizes many possibilities of organizations to fit within the
28,4/5 wide definition of SOEs. The broadness of the conceptualization offered in our paper has
the advantage of allowing many researchers to contribute to the on-going international
debate – however the growing hybridity of organizations presents a particular challenge
for organizations and the researchers who seek to define and study them.
The remainder of this editorial is structured as follows. Section 2 introduces many
276 views on the state of governance and accountability of SOEs research. Section 3 presents
the seven papers in this special issue and position’s their contribution to the growing field.
Finally, Section 4 reflects on lessons for policy makers and a future research agenda.

2. Rationale and research opportunities

In order to understand the rationale for research on the governance of SOE’s and their role
in recent public sector reforms, we begin by confirming the importance of the field and
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then attempt to circumscribe the link between SOE’s and public/corporate governance.

2.1 Proving the relevance of the research field

Reforms following economic crisis and increase in public debt have led to new
institutional arrangements for the delivery of public services around the world. As a
result the number of SOEs and the importance of their economic transactions are
increasingly significant in many countries (OECD, 2011; Bruton et al., 2015; Aharoni,
1981; Avsar et al., 2013; Millward, 2011). The proportion of SOEs among the Fortune
Global 500 has grown from 9 per cent in 2005 to 23 per cent in 2014 (PWC, 2015).
Worldwide SOEs now represent approximately 10 per cent of global gross domestic
product (Bruton et al., 2015; (The) Economist, 2010, 2012) and joint sales of $3.6 trillion
in 2011 (Kowalski et al., 2013).
At the local level in many countries empirical data reveals that more than half of the
public sector work in SOEs and similar public organizations rather than in the core
administration. SOEs undertake more than half of the public sectors investments and
their debt ratio is often even higher than in the core administration (Bertelsmann
Foundation, 2008; Bertelsmann Foundation, 2013; Grossi and Reichard, 2008; Millward,
2011; Swiss Statistic, 2013; National Bank of Belgium, 2009).
Because such substantial amounts of public expenditure are allocated to these
organizations, requirements and pressure for effectiveness, efficiency, sustainability
and transparency are increasing (OECD, 2005, 2011; Florio and Fecher, 2011; Whincop,
2005; Verhoest et al., 2012).

2.2 Paucity of studies and important research gaps

Considering the importance of their numbers, discussions have emerged about what
actions are appropriate in order to ensure the effectiveness, efficiency and transparency
of SOEs (OECD, 2010). The governance of SOEs around the world has seen
major inflexions over the last decades with the massive importation of private-sector
practices (Free and Radcliffe, 2009; OECD, 2005; IFAC, 2001; Florio and Fecher, 2011,
p. 364; Verhoest et al., 2012). Central to contemporary discourses are effective
mechanisms and good practices for corporate governance as well as adjustments to the
legal and institutional arrangements applicable to SOEs (Brennan and Solomon, 2008;
Clatworthy et al., 2000; Vermeer et al., 2006). However, relatively there are still a
few emperical studies. Bruton et al. (2015) provide a systematic literature review
examining the journals of the Financial Times’ top 45 list from 2000 to 2014. Over a
15-years period only 57 out of thousands articles published by the FT 45 were identified.
 They conclude that “although inquiry into SOEs is on the rise […] there is still a dearth of Corporate
research on the topic” (Bruton et al., 2015, p. 94). The same finding appears within the governance
public management and public administration fields; there is a disproportion of studies
on the core administration although empirical data show the increasing relevance of
and
SOEs. It appears that the scarcity of the research on SOE governance is additionally accountability
fragmented in different disciplines and groups. Our assumption is that the culprit for this
dispersion and paucity is not only the hybridity of SOEs per say but the ambivalence 277
surrounding notions of governance.

2.3 Matters of public and corporate governance

Governance is a broad term including different meanings and perceptions and is
generally used in different disciplines such as political science, public administration,
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economics and management (Almqvist et al., 2013).

Corporate governance refers to the exercise of power over corporate entities
(Tricker, 2012; Shleifer and Vishny, 1997), “mechanisms of steering and controlling”
(Colley et al., 2005) or “ways in which suppliers of finance assure themselves of getting
a return on investment” (Shleifer and Vishny, 1997). In sum, corporate governance
refers to systems by which companies are directed and controlled (Tricker, 2012;
European Commission, 2011, p. 2; International Federation of Accountants, 2001) and is
therefore relevant for all organizational forms, such as SOEs, family business,
cooperatives and not-for-profit firms.
In the public sector a debate around “governance” is related to new models and
principles of steering that appear in the form of networks and hybrid organizations.
Governance is not just about corporate management and marketization but also about
the changing nature of government and seeks to understand such transformations
(Kettl, 1993, 2000; Tricker, 1994; Rhodes, 2000). Thus, governance refers to all processes
whether undertaken by a government, market or network (Bevir, 2013) and deals with
the steering and coordination of various actors, often in network-type patterns of
collaboration (Rhodes, 1997). Governance therefore refers to the interaction processes
that take place in those networks (Klijn, 2012). Klijn identifies several characteristics of
public governance, such as strong focus on inter-organizational dimension of
service delivery, horizontal types of steering, improvement of quality of public services,
involvement of different societal actors as stakeholders and citizens to enhance
democratic legitimacy. Hence, public governance concerns accountability in relation to
specific public goals, which are not limited to service delivery (e.g. cost and quality of
services) but also include the impact of public policies on the community or society at
large (e.g. policy outcomes or value for money) (Almqvist et al., 2013). Public
governance acknowledges that the public services system is polycentric and includes
governmental as well as a wide array of third-party organizations and hybrid
governance models (e.g. purchaser-provider models, contracting out, outsourcing,
corporatization, public and private partnerships, etc.) (Valkama et al., 2013; Grossi
and Thomasson, 2015).
The open definitions of corporate governance and public governance presented
above were chosen not to foreclose the discussion on definitions but rather to serve as a
initial point of departure for diverse contributions. Some contributions in this special
issue focus mainly on corporate governance and accountability of SOEs and public
agencies, others on board composition and roles or public service motivation (PSM).
Other articles focus on typologies of public governance, the inter-organizational
dimension of service delivery, performance dimensions and values, mechanisms to
 IJPSM steer and control SOEs, external service providers and transparency and accountability
28,4/5 tools to increase political and democratic legitimacy. Our hope is that these papers
serve as a building block for more research in this wide-open and complex field.

3. Overture to eclectic SOE governance research

The special issue includes a selection of articles presented during the Euram-Mini-
278 conference held at Leipzig University in February 2015 and submitted in an open call
for papers. The seven articles included in the IJPSM special issues have different
disciplinary backgrounds (political science, public management, management control
and organization studies) and theoretical foundations. The majority of papers (five out
of seven) were based on qualitative methods and data (interviews, observations and
content analyses) and two articles were built on research hypothesis, correlations and
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regressions based on national and international data. In line with the spirit of the
journals, all selected articles were based on innovative experiences in SOEs at different
levels of governments (central and local), and different sectors (i.e. public
transportation, water services, public utilities, universities, etc.).
Susanna Alexius and Jenny Cisneros Örnberg’s article titled “Mission(s) impossible?
Configuring values in the governance of state-owned enterprises” aims to develop a
theory of hybrid organizations and their ability to contribute to value pluralism in
the public sector. The authors analysed from an organizational theory perspective
how different values underlying complex SOE missions are configured in the
micro-practices of the owner’s performance management system. The authors applied a
qualitative research approach to understand how civil servants in the Swedish
Government Offices handle potentially conflicting values underlying complex missions
of SOEs and identify four reform features, central to their work: professionalization,
investment teams, processes and standards and dialogues. The authors discovered that
these value configurations affect not only the political and managerial steering of the
SOEs but also the possibilities to contribute to value pluralism in the public sector
organizations. This article contributes to shedding the discrepancies between the
macro level of institutions and formal policy and the micro level of organizational
strategies and technologies.
Lene Tolstrup Christensen’s article titled “The return of the hierarchy: SOE’s in
marketization” aims to contribute to the conceptualization of SOEs as a mode of
governance in marketization via the theoretical lense of historical institutionalism. Her
qualitative paper presents the case of marketization of the Danish passenger rail and
provides valuable insights into the complexity and opportunities involved for the state in
controlling SOEs during marketization and how re-centralization occurs as a response to
this. The paper shows that market governance was layered on hierarchal governance of
the SOE that was later turned into a hybrid governance mode through corporatization.
This governance change has created ripple effects between hierarchy and market that
hamper marketization. The author concludes that the hybridity of SOEs as governance
mode changes over time, not because of legal changes in ownership or statute, but in the
interpretation of the role of the SOE by the Ministry of Transport and SOE management.
The article contributes to theoretical discussions about hybrid organizations and
re-centralization in post-new public management (NPM) era.
Van Thiel’s article on “boards of public sector organizations: a typology with Dutch
illustrations” aims to present two heuristic models in the composition and board
functions to help scholars and practitioners to identify different types of boards in public
sector organizations. The first typology described four archetypes of board based on two
 dimensions (one tier or two tier boards; and executive power or not). The second typology Corporate
describes roles and functions of boards in public sector organizations related to different governance
types of board members and various theoretical perspectives. The use of these typologies
presented with empirical findings of supervisory boards in Dutch ZBOs offers a more
and
comprehensive insight into what boards are and do in practice. accountability
Daniela Argento and Peeter Peda’s article titled “Interactions fostering trust and
contract combinations in local public services provision” seeks to explore the 279
complex relationship between trust and contracts in the Estonian context of
externalized local public services. Through an analysis of three different contractual
relationships and structures in the water services industry, the authors develop
framework to further our understanding of these various control mechanisms and
their possible impacts. They find that trust and contract can either be substitutes or
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complements and in some cases corrode each other. According to their study, the
impact may be related to personal interactions and the ability for organizations to
keep interest aligned. Thus, policy makers, regulators and managers of public service
companies can consider how the combination of various control mechanisms may
contribute to building and sustaining inter-organizational relationships while
academics may apply and extend the framework in other studies on control for
externalized public service providers.
Kuo-Tai s’s paper on “Public Service Motivation and Job Performance in Public
Utilities: An investigation in a Taiwan sample” quantitatively investigate which of the
PSM dimensions predict job performance of public employees in the Taiwanees public
utilities sector. There is a large number of empirical studies on PSM in the core
administration in the international literature but no empirical studies for SOEs. For this
reason the paper is an important contribution to better understand PSM in the specific
context of SOEs. PSM could be an even more important aspect as in other areas
because managers in SOEs have to find a balance between public service provision
goals and financial goals. The paper shows that self-sacrifice was significantly
negatively associated with job performance, while attraction to public policy making
and commitment to the public interests were significantly positively associated with
performance. Commitment to the public interests is the only dimension that
consistently predicts employees’ job performance.
Martyna Swiatczak, Michèle Morner and Nadine Finkbeiner explore how
performance measurement systems empower managers in SOEs in order to design
performance measurement systems that empower SOE managers towards an active
work role. The study combines insights from prior research on performance
measurement with the concept of psychological empowerment. Interviews highlight
that performance measurement systems that are designed according to the principles
of goal clarity, balanced goal difficulty, participative goal setting and a broad goal
scope positively influence the dimensions of empowerment such as competence,
self-determination and impact. In many countries there is an intense debate on the right
balance between political control and autonomy of SOEs with interferences of
politicians in daily life business activities on the one hand and SOEs moving away from
the overriding goals of their owner and their original public service goals on the other.
Discussions by the authors may help enhance the governance of SOEs through a
specific design of performance measurement systems to open this important field for
future research.
Dorothea Greiling, Albert Traxler and Sandra Stötzer’s article on sustainability
reporting (SR) in the Austrian, German and Swiss public sector investigates to what
 IJPSM extent public sector entities in Austria, Germany and Switzerland apply SR
28,4/5 guidelines in line with the Global Reporting Initiative. Because previous studies
mostly focus on SR in private companies or core administrations, this paper enhances
our knowledge of SR in the public sector and could be used by policy makers to
improve the design and implementation of rules on SR. The imbalance of reported
information indicates a need for more theoretical analysis in this area to eventually
280 improve SR in practice.
The contributions of this special issue are both theoretical and practical. Governance
and performance tools are relevant not only for internal decision makers but also
in power relationships, to build trust, align conflicting values and improve
transparency towards multiple stakeholders of state-owned enterprises. They are
also linked to broader institutional and social-economic dynamics and may carry
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unintended consequences.

4. Lessons for policy makers and perspectives for future research

The transfer of responsibilities between traditional government institutions on one
hand and private networks engaged in the development and the promotion of expert
systems, on the other (Giddens, 1991; Latour, 2004) has mainly occurred under the
slogan of NPM and the alluring promise of higher efficiency resulting from practices
used in the private sector. Such a movement has nevertheless prompted reservations
from those who worried about the weakening of state power in favour of a creeping
privatization of the ideals of public service (Lapsley, 2009).
The empirical data about the relevance of SOEs prove that a sustainable
public service provision and budget consolidation in many areas cannot be realized
in an effective and efficient way without powerful management and control of
SOEs. However, prior studies and the papers presented in this special issue show
that there are still serious corporate governance and accountability challenges,
which policy makers need to address. This special issue will hopefully provide
new, valuable knowledge to politicians, administrations, supervisory/management
boards, auditors and consultants in order for them to compare, assess and discuss
the various programmes that support corporate governance developments in
different countries.
Public corporate governance codes are important instruments to enhance the
management and oversight of SOEs, to establish with more precision the roles of public
authorities as a shareholder and they may help SOEs to become more transparent
and accountable (OECD, 2005, 2014; German Federation, 2009; Tricker, 2012).
The OECD’s working group of SOEs is currently revising the OECD Guidelines on
corporate governance of SOEs and has invited scholars and practitioners to contribute
to the consultation process.
With regards to future research and considering the scarcity of current studies
on SOEs the opportunities are abundant. As highlighted by Leblanc and Gillies
(2005, p. 1) “the amazing thing [about the production of codes and guidelines] is that it
has been based on very little knowledge about the relationship of corporate
governance to corporate performance, and almost no knowledge about how boards
actually work”. This haste to edict new rules warrants attention from researchers.
Overriding aims and initiatives from different organizations such as the OECD are
another example of the diffusion of corporate governance codes – here again, we
know much more about how these codes are embedded in the private sector (Aguilera
and Cuervo-Cazurra, 2004; Haxhi and van Ees, 2015) than in the public sector.
 Sociological perspectives which seek to shed light on the actual networks and Corporate
processes that underlie the spread of regulation, policies and “best” practices” in governance
society may be another promising venue.
On a conceptual level it seems important to continue the debate on the employed
and
definitions and terms in our research field. As outlined in this paper, the use (or misuse) accountability
of different terms and various definitions for corporate governance, public governance,
public sector governance, public service governance may cause confusion and hinder to 281
enhance our collective knowledge. We recognize the difficulty in developing specific
definitions, which are precise enough and still take into account various contexts in
different countries. However, current definitions for some research fields/subfields do
not precisely describe the specific research area/object. Could the term “public
corporate governance” help differentiate and specify a subfield of research? Would it
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be suitable in the debate on public governance and public sector governance to use
the term “corporate” to specify a subfield which focuses on corporate forms of public
authorities with legal and/or economic independency such as SOEs and the control of
these forms by the core administration rather than all organizations in the core
administration and the whole public sector such as quangos, para-government
organizations? Should the term “public” before corporate governance indicate that
the focus is on entities that are owned or controlled by public authorities? Scholars
could have different opinions and perspectives on these definitions and terms – but a
differentiated and precise debate could contribute to additionally enhance the state of
research in this field.
The various examples of hybrid governance models (such as purchaser – provider
models, contracting out, outsourcing/commissioning, corporatization, public-private
partnerships) present new problems in terms of improved performance management
and accountability. These new variants of hybrids require new models of performance
measurement and governance. There is a growing need to investigate issues and
implications on performance measurement of hybrid organizations using different
theoretical lenses and research methods as these concepts have not been addressed
insofar (Poister et al., 2010).
The methodologies to investigate the field should be as broad as the field itself.
Quantitative, comparable and robust data are still needed to increase our
understanding and tracking of the transformations, arrangements and social and
economic implications of SOE’s. However qualitative studies are required to further our
knowledge of the subtleties of these adaptive and enduring organizations and for
substance and insights to prevail over superficialities. This special issue has merely
laid the foundations for further examination of this important field at the local, national
and regional level around the world. Therefore we invite other researchers to build
further with interdisciplinary research and move forward toward an understanding of
the subject that is greater than the sum of its contributing parts.

Acknowledgements
The authors would like to extend warm thanks to Sandra van Thiel for her enthusiastic
support during the process of this special issue. They would also like to extend sincere
thanks to the external reviewers for this special issue for their great work:
Isabell Brusca, Enrico Bracci, Wouter Van Dooren, Adina Dudau, Francesca Manes
Rossi, Kirsi-Mari Kallio, Johan de Kruijf, Stephan Leixnering, Christoph Reichard,
Pasquale Ruggiero, Manfred Röber, Alessandro Sancino, Maria Francesca Sicilia,
Anna Thomasson, Ian Thynne, Jarmo Vakkuri, and Rick Vogel.
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Laegreid, P. (Eds), Government Agencies – Practices and Lessons from 30 Countries,
Palgrave Macmillan, Hampshire, pp. 413-439.

About the authors

Dr Giuseppe Grossi holds a PhD and is a Professor in Public Management and Accounting at the
School of Health and Society, Kristianstad University, Sweden, and Research Professor at the
Kozminski University, Poland. Grossi’s research focuses on public governance, whole-of-
government accounting and performance budgeting. He is the co-chair of the Accounting and
Accountability Special Interest Group for the International Research Society for Public
Management (IRSPM).
 Dr Ulf Papenfuß is a Junior-Professor for Public Management at the University of Leipzig. Corporate
He received his PhD from the Helmut-Schmidt University in Hamburg. His main research focus is
on public corporate governance and accounting-orientated controlling, responsible management
governance
of and in state-owned enterprises on all government levels as well as integrated management of and
core administration and state-owned enterprises, agencies and nonprofit organizations. accountability
Dr Marie-Soleil Tremblay is a Certified Professional Accountant and an Associate Professor
in accounting at l’École nationale d’administration publique. She received her PhD from the Laval
University, Canada. Her research focuses on the complexity of corporate governance, the travel of 285
ideas and on the particular role of women in organizations. Her preferred research context
involves the public sector. Dr Marie-Soleil Tremblay is the corresponding author and can be
contacted at: marie-soleil.tremblay@enap.ca
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