Corporatization

3 Key excerpts on "Corporatization"

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  eBook - ePub

  Powering China:Reforming the Electric Power Industry in China

  Reforming the Electric Power Industry in China

  • Xu Yi-chong(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  When pressures from high inflation were alleviated somewhat at the end of 1995, and especially after the Power Law was adopted in 1996, the Corporatization process in the power industry gained momentum. By 1997, many of major new power companies, especially those which were financed with capital from sources other than the central government, had been corporatized and many became shareholding companies. Corporatization required:

  • a separation of management from ownership;
  • clear specification of ownership interests in power sector assets;
  • specification of the rights and obligations of the management, employees and owners;
  • an accounting system consistent with international practices;
  • strengthening internal management; and
  • spin-off of non-core activities, such as housing, clinics, hotels and restaurants.61

  The transformation of the former centrally planned power industry into corporations with their own legal status has significant economic, legal and political ramifications. Legal scholars would focus on the issue of rights and obligations of firms. The economic perspective emphasizes the incentive structures for firms.62 But often the social aspects of Corporatization provide a more difficult issue for transition economies. For example, Corporatization meant transforming state-owned enterprises — 'social and economic conglomerates' responsible for social goods, such as cradle-to-grave welfare for employees and their dependants, as well as for production, which were not subject to hard budget constraints — into economic entities by relieving their social welfare burden, Corporatization therefore involves and affects people — those who are employed and those who employ. It was estimated that at least 20-30 per cent of the labour force of state enterprises in China was made redundant. Corporatization would inevitably involve reduction of superfluous personnel. When involuntary unemployment was not formally recognized as a possible contingency, converting the hidden (implicit) unemployment under the command economy to explicit unemployment during the Corporatization process would likely incur the risk of major political and social instability and could have disastrous effects in the power industry if the matter were not handled with extreme caution (see Chapter 8

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  Privatization

  NOMOS LX

  • Melissa Schwartzberg, Jack Knight(Authors)
  • 2018(Publication Date)
  • NYU Press

    (Publisher)

  Part II

  Privatization and the State

  Passage contains an image

  7

  Privatization as State Transformation

  Henry Farrell

  I. Introduction

  Privatization is an ambiguous term covering many loosely related phenomena. In this essay, I focus on one specific aspect of privatization—the privatization of governance. This sidesteps arguments about the presumed efficiency gains of, e.g., turning state-owned entities into for-profit corporations, and highlights the political consequences of privatization—how it takes decisions which had once been within the remit of democratic politics and hands them over to regulated private actors. Considered in this light, privatizing governance surely includes privatization in its narrow economic sense, especially given that the current trend towards privatized governance had its beginnings in economic privatization.

  Yet it also involves broader transformations. The key point, and key argument, of this essay is that privatization does not so much involve the shrinking of the state as its transformation. State control exercised through direct ownership (with associated relations of influence) is replaced by state control exercised through regulation (with associated relations of influence). In a very important sense, privatized entities typically remain imbricated with and embedded within the state. They are not abandoned to the vagaries of competitive markets. However, the politics of the state is transformed from one of ownership relations to one of politics mediated through regulators, which in part seek to turn privatized entities’ activities towards the purposes of the state, and in part look to protect these entities against external pressures.

  The privatization of state-owned entities helped transform the state’s relationship with the economy, so that it sought to shape economic outcomes externally through regulation rather than ownership while internally shifting its mode of operation to more closely resemble contractual relations. The turn to regulation has had international consequences, as national regulations clashed with each other, sometimes leading to some regulators winning, but often leading states that could not reach agreement among themselves to either limit the scope of regulation (through treaties intended to protect private actors) or to turn to private actors as governors themselves. Finally, the serpent is beginning to bite its own tail as private actors have sought to take advantage of international regimes to reshape the domestic reach of the state, defining inconvenient regulations as a kind of “taking” of their property and demanding compensation for them.

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  Hostile Business and the Sovereign State

  Privatized Governance, State Security and International Law

  • Michael J. Strauss(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  37 As companies that handle these and other privatized activities are increasingly global actors, it becomes possible for them to assemble the expertise and alliances to wage war, take and retain physical control of territory and perform ongoing governance. Business practices and financial mechanisms that have appeared amid globalization and liberalized capital markets offer a framework in which the conduct of states can be replicated by companies that want territorial governance oriented toward their interests. At present, the absence of coordination may be the only thing keeping this scenario from becoming a reality.

  1     The reasons for this lack of attention are unclear, but it might be affected by differences in the visibility of each trend. Privatizations often occur through open processes that entail public scrutiny, while entities acquiring privatized functions can have narrower obligations of accountability (e.g ., to investors or regulators but not to the public), and operate with more confidentiality and less transparency in doing business.

  2     Even in a more general sense, the impact of companies on politics and society is relatively unstudied despite the recognition that “their accumulated economic power inevitably translates into political power” and that modern politics cannot truly be understood without having a sense of the political power of business (Stephen Wilks, The Political Power of the Business Corporation (Cheltenham: Edward Elgar, 2013), 1–3).

  3     In the European Union, some 30,000 lobbyists acting on behalf of companies influence an estimated 75% of legislation (Ian Traynor, “30,000 Lobbyists and Counting: Is Brussels Under Corporate Sway?” The Guardian , 8 May 2014). In the United States, “corporations now spend about $2.6 billion a year on reported lobbying expenditures” (Lee Drutman, “How Corporate Lobbyists Conquered American Democracy,” The Atlantic , 20 April 2015). On a global scale, more than $1 trillion is spent annually, much of it by businesses, to bribe governments (World Bank, “The Costs of Corruption,” 8 April 2004, http://go.worldbank.org/LJA29GHA80,

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