The implications for corporate governance of the proposed mutual ownership of water utilities and public transport

Citation

Birchall J (2002) The implications for corporate governance of the proposed mutual ownership of water utilities and public transport. Journal of Corporate Law Studies, 2 (1), pp. 155-181. http://heinonline.org/HOL/Page?handle=hein.journals/corplstd2&div=10&g_sent=1&collection=journals#157

Abstract
Recently, there has been a growing interest in the UK in the potential of the "mutual" form of ownership structure. In particular, there has been speculation about how the restructuring of utilities that are natural monopolies might be achieved through mutual forms in which investor-ownership is replaced by consumer-ownership. This article focuses on water and public transport, in particular on water utilities in England and Wales, Railtrack and the London Tube. It discusses the reasons why mutual forms are being advocated at this time, outlines three organisational modes that have been proposed, and notes potential similarities and differences in their governance structures. It checks to see how important organisational form is compared with other important variables that affect corporate governance, then examines arguments for and against consumer ownership and control. Having established that there are strong arguments for privileging consumers over other stakeholders, it analyses the likely motivations of consumers to find out if they would be prepared, in practice, to take part in governance. In this task it draws on a theoretical model of what motivates people to participate currently being developed at Stirling University. The model predicts that individual customers are, in general, more likely to participate in transport than in water provision, though in both the level of participation may always be low. The collective action problem can be mitigated in transport by making use of volutanry user groups that already exist. If management can be relied on to maximise participation, then a full consumer mutual is viable. However, if this cannot be guaranteed, or if individual membership proves too costly to sustain, then a non-profit with membership drawn from user groups would better guarantee good goverance in the long term.

Journal
Journal of Corporate Law Studies: Volume 2, Issue 1