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Political control of state and municipality owned firms

Political control of state and municipality owned firms. Policy research seminar Ji ří Skuhrovec, 27.3.2014. SOEs - Definition. That is joint stock , limited, national and state companies (a.s., s.r.o., s.p ., n.p .), where public bodies own more than 50%.

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Political control of state and municipality owned firms

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  1. Political control of state and municipality owned firms Policyresearchseminar Jiří Skuhrovec, 27.3.2014

  2. SOEs - Definition • Thatis joint stock, limited, national and statecompanies (a.s., s.r.o., s.p., n.p.), where public bodiesown more than 50%. • Itis quasi-public (foundedmostlyaccording to corporatelaw) • Largest: ČEZ (and daughters), České dráhy (and daughters), Česká pošta, Budvar, Dopravní podnik Praha, Lesy ČR, Český aeroholding..

  3. SOEs in Czech republic - status • GDP share – I challengeyou to findout • Companieswithturnover > 1 mil. CZK count: 1096 and growing • Overal turnover 680 bln. CZK • 83% owned by state, rest ismunicipalities • Minor companies – hospitals, asset management etc.

  4. SOEs in Czech republic – dynamics. Why?

  5. SOEsgrowth – Economicrationale (?) • Nonewhatsoever. Statedoing business implies • Principal agent problems • Corruptionrisks • Soft budget constraint ( see Česká pošta, České dráhy, varioushospitals… ) • Privatizationleftovers? Not really… • Non economicrationale • strategicinterests (ČEZ .. Ok. Budvar .. Come on ) • Politicalincentives • Othersuggestions?

  6. OECD guidelines • OECD: Ifyou NEED to haveSOEs, theyshouldbemanagedindependently on politicians • Two-layergovernancestructure • Supervisoryboardischosenof independent experts to preventconflictofinterestissues and political abuse ofSOE‘s. • Maximum transparency to minimize risk ofmisconduct

  7. Study – turnoverofsupervisoryboards • Hypothesis – apoliticallymanagedfirmsshouldhaveorganizationalchangesrandomlydistributed in time • Method: • Drawinggraphs (thisishowpolicyrelevantarguments are done :-/ ) • Hypothesistesting … no need to. Youwillsee • But wewill do themafterall.

  8. Turnoverofsupervisoryboards (cities)

  9. Turnoverofsupervisoryboards (regions)

  10. Results • Hypothesisrejected – regions, municipal • Statecompanies – methodologyunapplicable. 10 govtsover past 14 years… Researchquestions: • Whythepoliticalcontrol? • How to documentpoliticalinfulence on firmsmanaged by centralgovernment? (case by case examination?) • How to demonstrate shift of agenda to theSOE’s? (expendituressturcture?)

  11. TransparencyevasionthroughSOEs? • Youdontneed to procureif: • You are a business withindustrialorcommercialnature • You are network industry (sometimes) • Youdontneed to answer 106 questionsif • Youhavegoodlawyers • Politicalopponentsdontseewhatyou do if • You are not stupidenough to putthemintotheboard How to documentthis?

  12. Brightfuture? • New govt. appointscouncilforboardnominations • Yet, these are mid-level ministry officialswith no experiencewith business, subordinate

  13. Thanksforattention

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