Introduction

Notwithstanding the flurry of divestment activity around the world over the last ten to fifteen years, state-owned enterprises (SOEs) continue to occupy a prominent place in many societies. Indeed, while numerous enterprises have been divested in part or in full, others have been relatively untouched by divestment decisions. New ones have also been established in areas of considerable public concern, including health and education. In these and other cases, governments have recognized a definite need, on the one hand, to remain in the business of producing or providing selected goods and services in the public interest but, on the other, to enhance by various means the capacity of the relevant enterprises to cope with the demands that are inevitably made on them. One such means, in circumstances in which it has not already been adopted, is to transform the enterprises into legally, freestanding corporate entities through a process of corporatization. It is this means which is addressed here by drawing, in large part, on material published elsewhere over the last two years (Thynne 1994a, 1995).

Modes of Corporatization

In practice, there are two main modes of corporatization which need to be examined with reference to the four broad types of organizations whose basic characteristics are outlined in Table 8.1. Both modes seek to increase an enterprise's operational flexibility and viability by giving it an existence as an established legal entity which is legally separate from that of a government. This separate status as a recognized ‘legal person’ enables the enterprise to enter into contracts, to buy and sell property, and to sue and be sued in its own corporate name (Birkinshaw, Harden, and Lewis 1990; Boo 1989; Coates 1990; Taggart 1990, 1993; Wettenhall 1990, 19936, 1995; Thynne 1991, 19946). In other important respects the two modes are different from each other. This applies especially to their legal bases and the extent to which the resulting enterprises are subject or open to some form of legislative control and judicial review.