Organizational Publicness and Mortality: Explaining the Dissolution of Local Authority Companies

ABSTRACT

Organizational publicness is likely to have important implications for the mortality or survival of local authority companies. Majority-owned companies and those experiencing more political control may be less prone to dissolution due to greater government commitment to their survival, than their minority-owned and more politically autonomous counterparts. Using survival analysis to test these ideas, this study finds that dissolved local authority companies in England are more likely to be minority-owned, but have more politicians on their board of directors. They also have fewer directors in total, and tend to take a not-for-profit rather than a profit-making form.

KEYWORDS:

• Publicness
• organizational mortality
• corporatization
• local government
• quantitative analysis

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed at https://doi.org/10.1080/14719037.2020.1825780

Notes

1. The study investigates only two of the three dimensions of publicness (control, ownership), identified by Bozeman (1987). It was not possible to measure levels of funding publicness because very few local SOEs declare all of the sources of company income in their annual accounts. Analysis of two out of three organizational publicness dimensions due to data constraints is common in the empirical publicness literature (see, for example, Bozeman and Bretschneider 1994; Miller and Moulton 2014).

2. With the single isolated exception of the Learning Trust, which took over the ‘failing’ education department of Hackney council in 2002 (Boyle and Humphreys 2012).

3. Measures of company performance (Return on Assets and Return on Capital) were excluded from the models due to the large number of missing observations for these figures in the FAME database, which meant the survival estimates were unable to converge.

4. The roles and responsibilities of local authority company boards in England mirror those of the one-tier boards of directors typically found amongst privately-owned firms in the UK, in which the chairman and managing director jointly supervise company activities with the support of executive and nonexecutive directors.

5. The mortality rate for local authority companies in England is much lower than that for private companies at large, which is just over 10% annually, with firms providing transportation (16.5%) and business administration service (15.7%) particularly prone to dissolution (Office for National Statistics, 2019). However, the local authority company mortality rate is about twice that estimated for UK central government agencies, which is about 8% for the 23-year period studied by James et al. (2016).

Additional information

Notes on contributors

Rhys Andrews

Professor Rhys Andrews is Professor of Public Management at Cardiff Business School. His research interests focus on cross-sector partnerships,strategic management and organizational performance. He has published more than 100 academic articles and is co-author of Strategic Managementand Public Service Performance and Public Service Efficiency: Reframing the Debate.