How UK local authorities control their subsidiaries: A conundrum in corporate and public governance.

Abstract

The pursuit of greater efficiency in a time of austerity in the past decade has led UK local governments to deliver local services in a new way: using subsidiary companies, many of them taking the form of conventional, non-profit enterprises, rather than outsourcing to private enterprises. The practice has energised service innovation by motivating these new corporate managers to act in entrepreneurial ways alien to the ethos of the civil servants whose work they superseded. It is called “corporatisation”, rather than “privatisation”. However, the rapid spread of the practice has outpaced both our theoretical appreciation of the issues and raised a series of practical concerns about the potential for conflicts of interest and the loss of control. This paper examines the small but growing literature about this phenomenon. Using a combination of theories from corporate governance and ethics, as well as documents from the public policy arena, it develops an agenda for research that will explore the varieties of approach to both the value creation and the governance of this new development.