Structure, Motivations and the Managers of the State-Owned Oil Companies

Abstract

While recognised by scholars (and practitioners) as a factor in privatisation (Vickers and Yarrow, 1988, pp. 18–19), the role of public sector managers has not been fully understood. There has been little work on why many managers are opposed to privatisation and why some are not, nor has there been much consideration as to why some managers are more successful in achieving their preferences. One of the reasons the role of the managers has not been satisfactorily examined is that they do not fall into standard categories of analysis. Managers of state-owned companies are not private sector employees but rather state employees subject to ministerial directives, and partly supported by central government funds; however, they are not normally included in analyses of government bureaucracies (Aharoni, 1986, p. 5; Drewry and Butcher, 1991, pp. 16–17). Conventional public choice models of individuals as economic utility maximisers are not useful in this case as they predict that the managers of Britain’s state-owned oil companies would welcome privatisation, because a move to the private sector would allow greater financial freedom for their company and higher salaries for them personally. Yet many managers actually impeded privatisation, in particular, the managers of BNOC and BGC worked against the government’s plans. What the conventional public choice models do not take into account are the variations in the company structures and therefore constraints that managers face, which in turn affect their preferences.