This presentation is a critical analysis of the paper by Giuseppe Grossi & Anna Thomasson "Jointly owned companies as instruments of local government: comparative evidence from the Swedish and Italian water sectors". The analysis was done during the lessons of Research Methodologies of the XVI cycle of the PhD course in Management and Information Technology at the University of Salerno.

1. GiuseppeGrossi&AnnaThomasson-
Jointlyownedcompaniesasinstrumentsof
localgovernment:comparativeevidence
fromtheSwedishandItalianwatersectors
Acriticalanalysisofacasestudy
Dario Di Nucci
University of Salerno

2. Outline
Research project Case studies
Conclusions Research project
analysis

4. Context
NewPublicManagement

5. Aim
How such companies can be governed in order
to avoid lack of accountability

6. Focus

7. Focus

8. Focus

9. • Cost price principle
• None of the companies is listed on any stock exchange
• CEO can’t be a member of the board
• Shareholders cannot directly interfere in the management
• Shareholders can appoint or remove the board of directors
• Special shareholder’s meeting
• City council members can be board members
Focus

10. Focus
• Companies expect to break even
• Cross-transfers from local goverments as «social costs»
• Big municipalities are often traded on the stock exchange
• Board has executive and supervisory functions
• Board members are appointed by the shareholders
• Rappresentation in the board can be proportional or not
• City council members cannot be board members

12. TheSwedish
Company
 A limited company in the Stockholm region
 Founded in 1989 by 1 municipality, but by 2008 participated by 6
 Increasing regulation
 Increasing demand for more advanced techniques
 Increasing improvement request for the delivered service

13. The Italian
Company
 A limited company in theTuscany region
 Founded in 1938 by 16 municipalities, but now is a joint-stock company

14. Framework

15. External
Control
 Swedish Company Act
 General law for local government
 Laws for delivery of public services
 56 municipalities in the areas of Grosseto
and Siena
 1994Water Act
 Optimal Territorial Area (OTA) governed
by Area Water Authority (AWA)
 Convenzione per la gestione del servizio
idrico integrato
 Piano d’Ambito

16. Ownership
and Internal
Control
 Annual General Shareholder meeting
 Director lasts 4 years
 Managing directors, chairman and financial
board develop directives and agreements
 Owners ensure control the management
 With less owners, CEO become more
independent
 Patti parasociali between public and
private owners
 The industrial partner has a strong
knowledge and experience in the service
provisioning
 One or two tier organization

17. Top
Management
 A parent company and 4 subsidiaries
 Parent company board consist of politicians
from the 4 largest owners
 4 directors, 4 substitutes, 1 chairman
 2 board members could be water and sewage
services’ experts
 Owners make decisions based on
management proposals
 9 members:
 1 president
 1 vice-president
 1 CEO
 6 directors
 Members last 5 years
 5 members appointed by public
 4 members appointed by private
(includingCEO)

18. Financing  Mostly by customer fees
 Fees are based upon the actual cost of
services in each specific municipality
 Budgets are separated in every
subsidiary
 No cross-subsidisation
 Fees are calculated within an OTA
 Public owners seek continuous
improvement of the services
without tariff levels increasing too
suddenly
 Private partners are interested in
profits and in raising tariffs

20. Conclusions
 Tensions can arise when companies have fragmented ownership.
 In the Italian case the conflict of interests emerges between the CEO and the
chairman.
 In the Swedish case the conflict of interests emerges between the company and
the owners.
 Issues in external control and internal management.
 The best governance mechanisms is foundation (secure inner accountability).
 External control doesn’t solve the potential conflicts of interests of hybrid
organization with fragmented ownership.
 Supplementary case-specific mechanisms are needed.

22. CaseStudy
Analysis

23. CaseStudy
Analysis

24. CaseStudy
Analysis

25. CaseStudy
Analysis

26. CaseStudy
Analysis
?

27. References
Giuseppe Grossi & AnnaThomasson (2011) Jointly owned companies as instruments
of local government: comparative evidence from the Swedish and Italian water
sectors, Policy Studies, 32:3, 277-289, DOI: 10.1080/01442872.2011.561695