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Government Corporations; A Focus of Policy and Administration, II*

Published online by Cambridge University Press:  02 September 2013

Marshall E. Dimock
Marshall E. Dimock
Affiliation:
Bethel, Vermont
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Extract

How to bring managerial independence and public accountability into a working accord, so that neither efficiency nor necessary controls will be neglected, is the fundamental problem arising out of the operation of government corporations. Having dealt with managerial independence in the first instalment of this article, we now are faced with the problem of explaining how such independence can be reconciled with the controls necessary to assure public accountability. Experience everywhere has shown that governments can carry on a business enterprise efficiently only, when it possesses sufficient autonomy and flexibility to call forth managerial skills that are self-reliant and inventive as well as prudent. It has been argued that the corporate device, when faithfully followed, is superior to departmentalism in at least three major respects: it is potentially less subject to injurious political considerations; it is more autonomous in organization and capable of a greater degree of unity in its management, both of which are essential to efficient operation; and it has more flexibility with regard to its financial operations and is designed to stand on its own financial feet, as a business-operated enterprise should. The competent manager of a government corporation must be free within his own sphere, but he must also be externally accountable in important respects as regards both policy and administration, and to both Congress and the President. To effect such an equilibrium is difficult, at best, but it is particularly difficult and uncertain when the political climate is hostile toward the social purposes for which government corporations are created.

Type
Research Article
Information
American Political Science Review , Volume 43 , Issue 6 , December 1949 , pp. 1145 - 1164
Copyright
Copyright © American Political Science Association 1949

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References

74 This is true, in theory, for several reasons: the corporation possesses a board of directors which shields it from party politics; its officials are set apart from the integrated departments and the political leaders who head them; officers are appointed for indefinite tenures, as a rule, rather than for fixed terms; the business functions of the corporation are not mingled with non-business and political functions, as they would be in a department; and business men recruited for positions in government corporations usually show less interest in partisan politics than those who make it a career. On the other hand, as shown in this article, the programs of most government corporations are “in politics” so far as their social acceptability and support are concerned, and hence pressure group politics are often a factor when party politics do not bulk so importantly. This point is well made in Greaves, H. R. G., The Civil Service in the Changing State (London, 1947), Chap. VGoogle Scholar.

75 This was referred to, it will be recalled, in the previous instalment. The report on Lending Agencies states that because of its commercial and temporary nature, government lending should be conducted only through an organization form which precludes confusion of the activity with the continuing political functions of government. This is an interesting observation, because the clear assumption is that once a function is imbedded into the fabric of a department, it is there to stay. Congress will not abolish it or severely restrict it, as, by inference, it is likely to do to the corporation. These assumptions, if true, become, it will be seen, policy matters of the highest importance.

76 The fourth related to the separation of board and management functions.

77 The report recommended: (1) “Business corporations” should be placed under the special supervisory agencies to be set up in appropriate departments of the government to give continuous and careful scrutiny to their affairs. These agencies should be provided with the special equipment and staff necessary to supervise competently the particular field in which the corporations operate. (2) Each “governmental corporation” should also be placed under a supervisory agency in the appropriate department. In addition, there should be continuing authority of the President to place such corporations under civil service, under other rules regarding personnel, and to apply such over-all governmental controls as may be found advisable in each case in the fields of budgeting, accounting, audit, and the issuance of obligations. (3) Where it is desirable to preserve the independence of the supervisory agency, it should be given semi-autonomous status in a department. The single responsible administrator at the head of the supervisory agency is preferable to the board form. The head of the supervisory agency should appoint the boards of directors of corporations in the case of boards which have government representation. If heads of supervisory agencies are to exercise an independent Review of corporate activities, they “should not be directors of corporations they supervise.” Report with Special Studies (Government Printing Office, 1937, p. 303)Google Scholar.

78 Hoover Commission, Federal Business Enterprises (Government Printing Office, 1949), p. 95Google Scholar.

79 Ibid., p. 8.

80 Ibid., p. 10.

81 Revolving Funds and Business Enterprises of the Government (Government Printing Office, 1949), p. 174Google Scholar.

82 One of the earliest treatments of this subject is Van Dorn, Harold, Government-Owned Corporations (New York, 1926)Google Scholar. See also Webbink, Paul, “Government-Owned Corporations,” in Encyclopedia of the Social Sciences (New York, 1932), Vol. VIIGoogle Scholar, and the summary of principles in Dimock, Marshall E., Government-Operated Enterprises in the Panama Canal Zone (Chicago, 1934)Google Scholar.

83 President's Committee on Administrative Management, Report with Special Studies, op. cit. The arguments in favor of departmental integration are well martialed in White's, Leonard D.Introduction to the Study of Public Administration (New York, rev. ed., 1939), Chap. IXGoogle Scholar.

84 Brookings Institution, Investigation of Executive Agencies of the Government (Government Printing Office, Washington, D. C., 1937)Google Scholar; and Wallace, Schuyler, Federal Departmentalization (New York, 1941), pp. 59–73Google Scholar.

85 One of the best expositions of this principle is found in Drucker, Peter, The Concept of the Corporation (New York, 1946)Google Scholar, chapters on decentralization.

86 This conclusion has been presented most convincingly by British writers. See, particularly, SirBunbury, Henry, “Public Corporation,” Public Administration (London), Vol. 22 (1944–1945)CrossRefGoogle Scholar; SirClarke, Geoffrey and others, “The Appropriate Type of Authority for the Operation of Publicly Owned Utility Services, and the Powers which They Should Have,” Public Administration (London), series, Oct., 1926Google Scholar, through Jan., 1930; Morrison, Herbert, Socialization and Transport (London, 1933)Google Scholar; O'Brien, T. H., British Experiments in Public Ownership and Control (London, 1937)Google Scholar; Robson, W. A. [ed.], Public Enterprise (London, 1937)Google Scholar; and Davies, Ernest, National Enterprise (London, 1946)Google Scholar.

87 See, for example a vigorous book by Davies, Ernest entitled National Enterprise (London, 1946)Google Scholar, wherein he says: “There is little so demoralizing as deprivation of responsibility. Too close relation between the corporation and the Ministry is therefore to be avoided” (p. 92). And at another point: “With planning and policy the Minister's responsibility, the Boards of public corporations need to be functional and executive” (p. 158).

88 “Soviet Government corporations have developed as independent juridical entities to manage property owned by the State,” says John Hazard, the best English-speaking authority on this subject. “Each has a director with independent powers of control, subject only to supervision by superiors and to rigid disciplinary measures, if his corporation fails. …“ “Soviet jurists have provided for the fostering of personal initiative … while still retaining state owneiship of the means of production as a cardinal principle of the Soviet State.” Hazard, John, “Soviet Government Corporations,” Michigan Law Review, Vol. 41 (Apr., 1943), p. 871CrossRefGoogle Scholar.

89 Key, V. O., “Government Corporations,” in Marx, P. M. (ed.), Elements of Public Administration (New York, 1946), p. 256Google Scholar.

90 Gordon, Lincoln, The Public Corporation in Great Britain (London and New York, 1938)Google Scholar; Thurston, John, Government Proprietary Corporations in English-Speaking Countries (Cambridge, Mass., 1937)Google Scholar; Dimock, Marshall E., British Public Utilities and National Development (London, 1933)Google Scholar.

91 The Hoover Commission recommendation is not necessarily inconsistent: “That where these corporations are located in the departments or major Government agencies, the heads of such agencies, or representatives designated by them, serve as ex officio chairmen of their advisory boards.” Federal Business Enterprises, op. cit., p. 10.

92 House Doc. No. 148, 81st Cong., 1st Sess., 1949.

93 The Civil Service in the Changing State, op. cit., p. 122.

94 Ibid., p. 121.

95 Morrison, Herbert, Socialization and Transport (London, 1933)Google Scholar.

96 Report of the Commission of Inquiry on Public Service Personnel, Better Government Personnel (New York, 1935), p. 68Google Scholar.

97 Congressional Record, 191 (1924)Google Scholar.

98 See C. Herman Pritchett's discussion of this question in The Tennessee Valley Authority (Chapel Hill, N. C., 1943), Chap. IXGoogle Scholar; also Finer, Herman, The TVA: Lessons for International Application (Montreal, 1944), pp. 134–144Google Scholar.

99 Pritchett, The Tennessee Valley Authority, op. cit., p. 306.

100 Lilienthal, and Marquis, , “The Conduct of Business Enterprises by the Federal Government,” Harvard Law Review, Vol. 54 (Feb., 1941), p. 576CrossRefGoogle Scholar.

101 Key, V. O., “Government Corporations,” in Marx, F. M. [ed.], Elements of Public Administration (New York, 1946), p. 256Google Scholar.

102 Dimock, Marshall E., British Public Utilities and National Development (London, 1933), pp. 321–332Google Scholar.

103 Davies, Ernest, National Enterprise (London, 1946), p. 18Google Scholar.

104 Hazard, John, “Soviet Government Corporations,” Michigan Law Review, Vol. 41 (Apr., 1943), p. 859Google Scholar.

105 Dewar, Margaret, Industrial Management in the U. S. S. R. (Royal Institute of International Affairs, 1945), p. 53Google Scholar.

106 Thurston, John, Government Proprietary Corporations in the English-Speaking Countries (Cambridge, Mass., 1937), p. 197Google Scholar.

107 Among American political scientists, Mr. Willoughby deserves the credit for first laying the foundation for the corporate device. See his article, “The National Government as a Holding Corporation,” Political Science Quarterly, Vol. 32 (1917), p. 510Google Scholar.

108 This is not to overlook the problem of transcendent importance, namely, whether government should, or should not, undertake a given “business” function as a broad question of policy related to the form of our common economic and political life. This article has attempted to reveal an awareness of that issue throughout, but, as stated at the outset, it is not the one that is directly broached at this time. The underlying assumption here is that if the majority wills to undertake a business function, the best interests of popular government are served by attempting to make the administration of that function as efficient as possible in order that loss of popular confidence in government as a whole may not be invited.

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