Corporate Autonomy and Institutional Control: The Crown Corporation as a Problem in Organization Design 9780773563339

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Corporate Autonomy and Institutional Control

CANADIAN PUBLIC ADMINISTRATION SERIES COLLECTION ADMINISTRATION PUBLIQUE CANADIENNE Iain Gow / A. Paul Pross, General Editors I Directeurs generaux The Institute of Public Administration of Canada L'lnstitut d' administration publique du Canada This series is sponsored by the Institute of Public Administration of Canada as part of its constitutional commitment to encourage research on contemporary issues in Canadian public administration and public policy, and to foster wider knowledge and understanding amongst practitioners and the concerned citizen. There is no fixed number of volumes planned for the series, but under the supervision of the Research Committee of the Institute, the General Editor, and the Associate Editor, efforts will be made to ensure that significant areas will receive appropriate attention. L'lnstitut d' administration publique du Canada commandite cette collection dans le cadre de ses engagements statutaires. II se doit de promouvoir la recherche sur des problemes d' actualite portant sur 1' administration publique et la determination des politiques publiques ainsi que d' encourager les praticiens et les citoyens interesses a les mieux connaitre et a les mieux comprendre. II n'a pas ete prevu de nombre de volumes donne pour la collection mais, sous la direction du Comite de recherche de 1'Institut, du Directeur general, et du Directeur associe, 1on s'efforce d'accorder 1'attention voulue aux questions importantes.

The Biography of an Institution: The Civil Service Commission of Canada, 1908-1967 J. E. Hodgetts, William McCloskey, Reginald Whitaker, V. Seymour Wilson An edition in French has been published under the title Histoire d'une institution: La Commission de la Fonction publique du Canada, 1908-1967 by Les Presses de 1'Universite Laval Old Age Pensions and Policy-Making in Canada Kenneth Bryden Provincial Governments as Employers: A Survey of Public Personnel Administration in Canada's Provinces J. E. Hodgetts and O. P. Dwivedi Transport in Transition: The Reorganization in the Federal Transport Portfolio John W. Langford Initiative and Response: The Adaptation of Canadian Federalism to Regional Economic Development Anthony G. S. Careless Canada's Salesman to the World: The Department of Trade and Commerce, 1892-1939 O. Mary Hill Conflict over the Columbia: The Canadian Background to an Historic Treaty Neil A. Swainson L'Economiste et la chose publique Jean-Luc Migue (Published by Les Presses de 1'Universite du Quebec) Federalism, Bureaucracy, and Public Policy: The Politics of Highway Transport Regulation Richard J. Schultz Federal-Provincial Collaboration: The Canada-New Brunswick General Development Agreement Donald J. Savoie Judicial Administration in Canada Perry S. Millar and Carl Baar The Language of the Skies: The Bilingual Air Traffic Control Conflict in Canada Sandford F. Borins An edition in French is distributed under the title Le francais dans les airs: le conflit du bilinguisme dans le controle de la circulation aerienne au Canada by Les Presses de 1'Universite du Quebec L'Analyse des politiques gouvernementales: trois monographies Michel Bellavance, Roland Parenteau et Maurice Patry (Published by Les Presses de 1'Universite Laval)

Canadian Social Welfare Policy: Federal and Provincial Dimensions Edited by Jacqueline S. Ismael Maturing in Hard Times: Canada's Department of Finance through the Great Depression Robert B. Bryce Pour comprendre 1'appareil judiciaire quebecois Monique Giard et Marcel Proulx (Published by Les Presses de 1'Universite du Quebec) Histoire de ('administration publique quebecoise 1867-1970 James lain Gow (Published by Les Presses de 1'Universite de Montreal) Health Insurance and Canadian Public Policy: The Seven Decisions That Created the Canadian Health Insurance System and Their Outcomes Malcolm G. Taylor Canada and Immigration: Public Policy and Public Concern Second Edition Freda Hawkins Canada's Department of External Affairs: The Early Years, 1909-1946 John Hilliker An edition in French has been published under the title Le ministere des Affaires exterieures du Canada, 1909-1946: Les debuts by Les Presses de 1'Universite Laval Getting It Right: Regional Development in Canada R. Harley McGee Corporate Autonomy and Institutional Control The Crown Corporation as a Problem in Organization Design Douglas F. Stevens

Corporate Autonomy and Institutional Control The Crown Corporation as a Problem in Organization Design

DOUGLAS F. STEVENS

The Institute of Public Administration of Canada L'Institut d'Administration publique du Canada McGill-Queen's University Press Montreal & Kingston • London • Buffalo

© McGill-Queen's University Press 1993 ISBN 0-7735-0900-3 Legal deposit second quarter 1993 Bibliotheque nationale du Quebec Printed in Canada on acid-free paper This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada.

Canadian Cataloguing in Publication Data Stevens, Douglas F. (Douglas Frederick) Corporate autonomy and institutional control: the crown corporation as a problem in organization design (Canadian public administration series) Includes bibliographical references and index. ISBN 0-7735-0900-3 1. Corporations, Government - Prairie Provinces. 2. Organization. I. Title. II. Series. HD4005.S73 1993 338.6'2'09712 C93-090155-X Typeset in Times 10/12 by Caractera production graphique inc., Quebec City.

VI

Contents PREFACE

1 The Autonomy and Control Problem: Normative Perspectives 2 A Positive Perspective: The Game Analogy 3 Alberta: The Self-contained Design 4 Manitoba: The Vertical Information Systems Design 5 Saskatchewan: The Lateral Relations Design 6 Origins and Consequences of Crown-Corporation Organization Designs 7 Corporate Autonomy and Institutional Control: Conclusions

IX

3 33 53 84 115 152 180

APPENDIXES

1 Alberta Crown Corporations 2 Manitoba Crown Corporations 3 Saskatchewan Crown Corporations NOTES BIBLIOGRAPHY INDEX

187 193 197 203 213 219

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Preface

This book is written for those who would like to think that the decisionmaking relationship between governments and Crown corporations is explicable in terms of corporate organizational theory but are perplexed when reality does not conform to expectations. It encourages the student of government enterprise—the practitioner, academic, and interested bystander—to differentiate very carefully between the formal dimensions of an official organizational chart and the informal dimensions of actual information processing and decision-making practices. Crown corporations have the same organizational form as privatesector corporations. Therefore, it is tempting to apply a private-sector corporate analogy to the study of Crown corporations: to pretend, in other words, that "a corporation is a corporation." Another analogy, the "game analogy," assumes that different kinds of Crown-corporation decision makers have their own objectives that they pursue subject to certain externally imposed constraints (the "rules of the game"). Like the private-sector corporate analogy, however, that is only an analogy. As such, it does not yield a perfect understanding of the Crowncorporation instrument. The heart of this book consists of chapters that investigate, in practical terms, the effects of different Crown-corporation organization designs on the balancing of corporate autonomy and institutional control. Such observations, of course, are not available without the collaboration of practitioners. Comments offered by the politicians, bureaucrats, and Crown-corporation executives interviewed for this study are not attributed because the interviews were held in confidence. It would be ungrateful, however, to fail to thank those who have thus been of assistance. A list of interviewees is accordingly included in the Bibliography.

PREFACE

Like many books, this one began as a doctoral thesis, in this case within the Department of Political Economy, University of Toronto. I thank my supervisor, Carolyn Tuohy, and my committee members, Michael Trebilcock and Ronald Manzer, for their considerable encouragement and guidance. I am greatly indebted, as well, to my parents and many friends who viewed the penury and dementia such an undertaking almost invariably entails with tolerance and humour and who now, no doubt, expect some kind of normalization to occur.

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Chapter One The Autonomy and Control Problem: Normative Perspectives The question of balance is a critical issue when studying Crown corporations in Canada. How can Crown corporations achieve some sort of balance between the amount of autonomy they require to achieve their objectives as instruments of public policy, and the amount of institutional control required by governments both as providers of direction and evaluators of the performance of Crown corporations? This issue is of interest because it raises basic questions concerning the design of the decision-making relationship between the government and Crown corporations—that is, the traditional basis upon which this relationship is structured and the alternative ways of structuring it. John W. Langford, in "Crown Corporations as Instruments of Policy," notes that one of the most "telling questions" vis-a-vis Crown corporations turns upon "the problem of establishing a balance between the autonomy that the Crown corporation requires as an organizational form to perform the task it has been given, on the one hand, and the government's need to control and direct the corporation and Parliament's need to oversee or scrutinize it, on the other."1 The Economic Council of Canada describes the problem as follows: The fundamental challenge in structuring a control regime is to establish an appropriate balance between the competing requirements for managerial autonomy and public control. Excessive control will undermine the independent status of the corporation and will dissipate the benefits that are available from the delegation of decision making responsibilities. Inadequate direction and control, on the other hand, will jeopardize the role and usefulness of public corporations as instruments of public policy. The challenge of steering between the Scylla of inadequate commercial freedom and the Charybdes of weak public direction and control

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

has confronted every country that has a significant government enterprise sector.2 This problem is invariably approached in normative rather than positive terms; that is, in terms of what "ought" to happen within the government/Crown-corporation decision-making relationship, rather than what actually does take place. This approach is employed because traditional approaches to analyzing Crown corporations in Canada have been essentially normative in orientation. In other words, they "preach" to the problem. But this orientation is true of the more recent approaches of economists as well. They assume, for example, that the prescriptions of theories and models developed to explain corporate decentralization and organization design in the private corporate sector can be applied to the Crown corporation as a problem in organization design. I have developed a predictive, rather than a prescriptive, approach to the problem. But let us begin by considering, in the fashion of those who prefer a normative approach, the basic analytical dimensions of the problem. One such dimension is the managerial flexibility inherent in the corporate form of organization. This dimension prescribes a flexibility of decision making, that flexibility being the key attribute of corporate autonomy. A separate but interrelated dimension of the problem is what constitutes effective monitoring of Crowncorporation performance by the government. This dimension is the key attribute of institutional control. In any normative approaches to the analysis of the Crown corporation as a problem in organization design, the analyst must be able to specify what is meant by "flexibility of decision making" by Crown corporations; by "effective monitoring and control" of Crown-corporation performance by the government, and—most importantly—by the "optimal balancing" of these two basic dimensions of the problem. These concepts are grounded, for the most part, in corporate organizational theory. Only recently, have they been incorporated into the prescriptive literature dealing with the subject of Crown corporations. As such, it is logical to consider the development of this literature in terms of the movement of these concepts from the private to the public sector. 1 have supplemented these concepts, however, with a positive approach to the problem—one in which I predict and investigate the effects of different Crown-corporation organization designs on the balancing of autonomy and control, in practice. My goal is to integrate normative and positive perspectives on the Crown corporation as a problem in organization design. My focus, as such, is more on the practice of public management and the dynamics of public policy 4

The Autonomy and Control Problem decision making than the traditional cachets of political science and economics. Indeed, I want to exorcise one of the perennial cliches of the public-administration literature —the notion that the Crowncorporation autonomy-control issue is "standard," but somehow unfathomable. This book is best read as an agnostic response to (and critique of) all Crown-corporation literature that carves in stone any single design as the most "appropriate" for the government/Crown-corporation decision-making relationship. Recognizing, however, that there is a certain diversity to government/Crown-corporation relations that is not amenable to capture by the assumptions of methodological individualism, I have broadened the institutional context of the analysis in chapter 6 to acknowledge that, just as there is no one best way to organize Crown corporations, there is probably no one best way to study them.

FLEXIBILITY OF DECISION MAKING AS CORPORATE AUTONOMY The case for flexibility of decision making by Crown corporations is traditionally argued in terms of the normative dimensions of "corporate autonomy." This doctrine holds that Crown corporations ought to be independent from the control of government, especially from the influence of partisan politics on commercial activities. For the most part, however, although the traditional literature dwells on the minutiae of institutional control of Crown corporations by the government, it is not at all eloquent on the question of why Crown corporations require some measure of flexibility in their decision-making relationship with the government. Tupper and Doern note that earlier in the century proponents of Crown corporations frequently, and somewhat immodestly, extolled the perceived virtues of this "new administrative form," arguing that the managerial autonomy inherent within the corporate form of organization provided an adequate rationale to support the very concept of the Crown corporation. It was possible, these early proponents asserted, to combine within a single administrative form the "finest features of public and business administration."3 The following exhortation is typical. "If we establish the public corporation, it must be for certain reasons. What are they ? They are that we seek to combine the principles of public accountability ... with the liveliness, initiative, and a considerable degree of the freedom of a quick-moving and progressive business enterprise. Either that is the case for a public corporation or there is no case at all."4 Such exhortations, aside from their inarticulateness as to why Crown

5

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corporations actually require flexibility of decision making, invite a response-in-kind from people unconvinced of the compatibility of such a union. There are "optimists," say Tupper and Doern, who assume that "a balance can be struck between managerial autonomy, executive discretion and parliamentary scrutiny." But there are "pessimists," they add, who assume that Crown corporations have "contributed to, rather than resolved, the tension between intervention and responsible government."5 Herbert Morrison, in his authoritative prescription concerning the relationship between the British government and its nationalized industries, was the first to articulate what became a standard, corporateautonomy rationale for Crown corporations. This rationale held that "public corporations should act as commercial entities at arms length from the government, subject only to policy direction by the responsible minister on matters affecting the national interest."6 Corporate autonomy rationales developed in Canada have simply enshrined Morrison's arm's-length formulation without lending it much additional perceptible substance. Mallory, for example, simply asserts that Crown corporations are "essentially a commercial undertaking which should be free from government and political interference and with the same managerial freedom as similar undertakings in private hands."7 Gracey, as well, prescribes a "traditional arms length relationship between governments and individual ministers, on the one hand, and Crown corporations on the other," asserting that "the basic raison d'etre of the federal Crown-corporation form has been to separate the management of an activity from continuous partisan intervention and day-today government or parliamentary scrutiny and debate."8 Marsha Gordon, in what can be termed a strong tribute to the concept of corporate autonomy, argues that "once corporate objectives are broadly defined, it is imperative that government allow management and the board of directors (of Crown corporations) total freedom to design and implement strategies to reach those objectives." Developed from the standpoint of the government as entrepreneur, her argument is adamant in its support of the concept of corporate autonomy. She holds that "political considerations ... can undermine the efficiency of a state enterprise and cost taxpayers money," that management decisions "made without political interference normally improve efficiency." The essence of her strident defence of the concept of corporate autonomy can best be summed up in her assertion that "there are powerful arguments in terms of economic efficiency ... for having a government corporation removed as far as possible from political interference in its day-to-day activities."9 Unfortunately, she does not identify what those specific efficiency arguments might be. 6

The Autonomy and Control Problem To conceptualize such arguments, it is necessary to refer to the literature of corporate organizational theory and, specifically, to theories and models of corporate decentralization and organization design. Corporate organizational theory contains several comparisons of organizational structures and decision systems that depict, on the one hand, inflexibility of decision making (often described as "centralization"), and, on the other, more flexible ("decentralized") arrangements. T. Burns and G. M. Stalker, for example, identify two types of organizational structure—the mechanistic and the organic. The mechanistic model, effective in stable environments, has hierarchical structures with stable lines of authority and communication and welldefined roles. The organic structure, effective in rapidly changing environments, has no clearly defined hierarchy, being made up of decentralized quasi-autonomous units within the organization. Thus, the organization structure is "contingent" upon the nature of the firm's environment. "The beginning of administrative wisdom," according to Burns and Stalker, "is the awareness that there is no one optimum type of management system." This idea has come to be known as the "contingency theory of organizational analysis."10 Alfred A. Chandler Jr, another proponent of the contingency theory of organizational analysis, directs his attention toward the emergence and growth of the multidivisional form of corporate organizational structure — a form he calls the "decentralized" structure. Concluding that "structure follows strategy," Chandler finds in his comparative historical analysis that "firms pursuing a growth strategy in a single industry utilize the centralized functional form (of organization), while those pursuing growth through diversification assume the decentralized form or the geographic division form." 11 O. E. Williamson, building to a large extent on the foundations established by Chandler, uses the phenomenon of the multidivisional structure to formulate a theory of the development of internal organizational forms in the modern diversified corporation. As P. M. Jackson explains in The Political Economy of Bureaucracy, the Williamson analysis, like those of Burns and Stalker and Chandler, distinguishes two organizational forms, one more decentralized than the other: the unitary form (the U-form) and the multidivisional form (the M-form). A. The U-form. Each operating division in the U-form organization performs a specialized function (i.e. sales, finance, production, R&D personnel, etc.) for ALL product lines of the firm; B. The M-form. This is composed of operating divisions or quasifirms which perform specialized functions for a single product. 7

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

Each quasi-firm is responsible to a head office, which allocates resources amongst them. 12 There comes a point, says Williamson in The Multi-Divisional Hypothesis, when the U-form gives way to the M-form. Tasks are decomposed into quasi-autonomous operating divisions and the corporation becomes a mixture of organizational forms. On the first decomposition it is an M-form made up of quasi-firms, and on the second decomposition each quasi-firm is organized on the U-form. The salient feature of the multidivisional form is its incorporation of a structural differentiation between operating and strategic decision categories and responsibilities. The quasi-autonomous divisions make the day-to-day operating decisions, leaving the corporate head office free to concentrate on the long-term strategic decisions. This differentiation is critical (almost standard) from the standpoint of discerning between centralized and decentralized forms of corporate organization. Structure, according to Williamson, can become a deliberate strategy. It is possible, he argues, to make use of the organizational form as an independent variable to effect changes in internal efficiency, compliance and the strategic planning process within an organization.13 As such, the M-form can be thought of as the product of an exercise in organization design, a process defined by Jay Galbraith as a "conscious rational choice of the organization form to be used in the pursuit of specific objectives."14 For Galbraith, who has developed an information-processing model of organization design in which alternative organizing modes consist of a choice of "structure and information and decision processes," one chooses in accordance with the basic information-processing objectives of the organization. These, says Galbraith, are either to: (1) reduce the amount of information processing required to coordinate the activities of the organization; or (2) increase the capacity of the organization to process greater amounts of information. For each objective, a decentralization strategy is available: either the creation of self-contained units (vertical decentralization), if the objective is to reduce information-processing requirements; or the creation of lateral relations (horizontal decentralization), if the objective is an enhanced information-processing capacity. Of these two decentralization strategies, the transactions-cost logic that underlies the creation of self-contained units is the more straightforward. By having individual units of the organization handle a category of production on their own, with most of the resources they need to indulge in that category of production, the information requirements of the organization are reduced. That is, first, reducing the output diversity faced by a single group of resources; and, second, 8

The Autonomy and Control Problem effecting a less complex division of labour. The critical effect, from the standpoint of decentralizing decision making within the organization, is that the point of decision making is moved closer to the source of information. More decisions can then be taken at lower levels of the organization, supported only by local information, because few resources are shared and each task is performed more or less independently of the other. According to Galbraith, the creation of selfcontained units results in reduced information costs to the organization in two basic ways. First, the quantity of information required to "coordinate and conciliate demands" is reduced, because "the sharing is largely eliminated"; in other words, information costs are reduced because there are fewer demands to process. Second, because the "point of decision" is moved closer to the source of information, vertical communication channels are shorter and less congested. Again, reduced information costs result. An alternative design strategy—one that decentralizes decisions without creating self-contained units —is the creation of lateral relations. This strategy, according to Galbraith, cuts across formal lines of authority, making use of the "informal organization" to acquire and process information by adding horizontal (lateral) informationprocessing devices to existing vertical communications channels. Although such devices sometimes arise spontaneously, notes Galbraith, they often have to be especially designed, particularly if different kinds of participants in the decision-making process have different, at times antagonistic, attitudes. The creation of lateral relations, adds Galbraith, can be as simple as facilitating direct contact between managers jointly affected by a problem. But, he notes, it can also extend to the creation of task forces, teams, liaison roles, integrating roles, and linked managerial roles sequentially to the establishment of a matrix organization. Although the creation of selfcontained units does, as Galbraith points out, largely eliminate the sharing of information (and decision perspectives), the creation of lateral relations is actually based on sharing information for joint decision making and the integration of different decision perspectives. The transactions-costs logic underlying the creation of lateral relations is not quite as straightforward as that found in the creation of self-contained units. The creation of lateral relations, while a decentralization strategy, is also a monitoring and control strategy, with the objective of increasing the capacity of the organization to process greater amounts of information. Its transactional gains are apparent only when the strategy is compared to investment in vertical information systems, a non-decentralization strategy that supports the same objective but relies inordinately on the use of vertical communication 9

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

channels. Because the addition of horizontal communication channels reduces pressure on existing vertical communication channels, there is less congestion and information loss. The decentralization of the lateral relations design thus carries with it the potential for transactional gains in the form of reduced information costs. Galbraith and Williamson agree that corporate decentralization, properly implemented, can result in reduced information costs and increased organizational efficiency. Williamson, moreover, argues that corporate decentralization results in the containment of control loss. At the heart of the multidivisional formulation is the correction of certain problems resulting from the growth and internal development of the U-form—a particular stage at which a "cumulative controlloss" occurs, with negative consequences for internal efficiency and the strategic decision-making process. As the U-form grows in size and more and more levels are added to the hierarchy, additional opportunities are created for incomplete, inaccurate transmission of information—both up and down the hierarchy and from side to side. The conventional response to such a control-loss, says Williamson, is to bring the heads of the functional divisions into the peak coordination process. However, because the "natural posture" of these functional executives is one of "advocacy" in representing the interests of their operating units, a situation develops in which functionally derived information is likely to be manipulated in terms of the "partisan interests" of the functional divisions and a shift away from overall enterprise concerns is apt to result. 15 This problem is described by Williamson in terms of the quality of information, not the quantity of information, although he does not rule out the quantity of information as being one possible dimension of the overall control-loss problem. Williamson's solution to the problem contains an implicit, qualitative decentralization rationale: that is, the idea that the most effective way of countering the control-loss experienced by the U-form is to introduce a measure of quasi-autonomy into the lower reaches of the organization. The basic decentralization strategy—one which bears a certain resemblance to Galbraith's creation of self-contained units — involves the decomposition of organizational tasks and objectives into product or geographical categories, rather than the functional categories of the U-form. The reasoning behind this decomposition, however, can be contrasted with that advanced to support the creation of selfcontained units. Galbraith, as noted, argues the case for corporate decentralization in terms of reduced information costs and the microprocesses of organizational efficiency. The issue of organizational efficiency, in the qualitative reckoning of the M-form hypothesis, is 10

The Autonomy and Control Problem clearly subsidiary to the containment of control-loss in the peak coordination processes of the organization. It is a subproblem that can be most appropriately dealt with once the control-loss problem has been resolved. As noted earlier, traditional literature dealing with the subject of Crown corporations in Canada does not make the case for flexibility of decision making by Crown corporations in terms of reduced information costs, increased organizational efficiency, or containment of control-loss within a flawed organization design. More recent approaches to the subject, however, seek to adduce the properties of the Crown-corporation instrument from the perspective of "instrument choice." A. W. Johnson, for example, asserts that there are occasions when "the gulf between the ethos which animates private-sector enterprise (the commercial ethos) and the ethos which animates the state in wanting public enterprise to undertake some public service (the public-service ethos) is so wide that it would be artificial or unworkable to impose that public service on the private sector." Consequently, according to Johnson, the public (Crown) corporation being created is obviously "modelled on the private corporation it is displacing." The independence of Crown corporations, says Johnson, is "not simply the product of the obvious conclusion that Crown corporations could not successfully operate in the marketplace if they were hampered by the same rules that bind and constrain a government department." Rather, he says, "this independence inheres in the very concept of Crown corporations as an instrument of public policy"—a forcefully expressed, but nonetheless purely exhortative, rationale.16 Economists employing the perspective of instrument choice describe the dynamics of this approach as the "calculus" of instrument choice. This approach is based upon variations of the transactions-cost concept, derived largely from the notion of information costs, as found in the economic literature dealing with the theory of the firm. It contains a variety of insights relative to the evolution of the corporate form of organization and the design of organizational innovations that economize on transactions costs. Moreover, it poses a basic question that is central to the analysis of the Crown corporation as a problem in organization design. If, as the proponents of instrument choice contend, the degree of operating autonomy is a critical variable in the efficiency of large-scale, private-sector corporate organizations, might this not validate—by way of economic theory—the need for flexibility of decision making by Crown corporations ? R. Hirshhorn, project director of the Economic Council of Canada's 1986 comprehensive report on Crown corporations in Canada, Minding 11

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

the Public's Business, states that the "essence" of government enterprise is a "division of decision-making responsibilities which in general terms appears to be not unlike that to be found in many private organizations." More specifically, he cites the "principle of dividing up large organizations into quasi-autonomous divisions, well established among large private corporations." Hirshhorn devotes considerable attention to the decentralized, multidi visional form of corporate organization, observing that M-form corporations have been able to realize transactional economies sufficient to offset many of the diseconomies of large-scale organizations. He concludes that the transactional gains attributable to the M-form "are, at least in principle, accessible to the public sector."17 This conclusion, replicated as follows in the Economic Council's Minding the Public's Business, represents an explicit, normative economic perspective on flexibility of decision making by Crown corporations in a decentralized, government/Crowncorporation decision-making relationship: An important consequence of the multidivisional structure is that it allows for some relocation of the detailed rules and regulations needed to control large centralized organizations. These rules tend to impair management flexibility and responsiveness. This is particularly so in the public sector, where there is a heavy reliance on rules, many of which are unsuited to commercial pursuits. Delegation in the public sector promises a degree of relief from limiting rules with respect to disbursements, purchases, and staffing. Corporate managers can thus acquire more of the discretion necessary for effective decision making in a commercial environment.18

EFFECTIVE MONITORING AS INSTITUTIONAL CONTROL Traditional analyses of the institutional control of Crown corporations by the government are developed, for the most part, from the standpoint of the government as sovereign, rather than government as entrepreneur. They tend to focus on important but traditional concerns regarding accountability of Crown corporations to governments and legislatures. It is useful, at this point, to differentiate between the terms "accountability" and "control." According to Jackson, the basic idea behind the concept of accountability is that "one party is accountable to the other, in the sense that one of the parties has the right to call upon the other to give him an account of his activities," a relationship which involves the "giving of information." The inherent "weakness" of any system of accountability is that "the accountee ... 12

The Autonomy and Control Problem can control the information that is used both for decision making and in providing an account of the activities leading up to the decision." Regardless of the facet of accountability selected for consideration, says Jackson, it is useful to make a distinction between accountability and control, to "look at the problem in terms of achieving control over the activities of public authorities rather than rendering them accountable."19 Throughout this analysis, we will differentiate between exante (control) measures, on the one hand, and ex-post (accountability) measures on the other. I have deliberately emphasized the former. The traditional rationales advanced to support institutional control of Crown corporations by the government are as numerous as the wouldbe controllers of Crown corporations. Invariably, however, they emphasize the primacy of Parliament, referring often to the powers of Parliament to scrutinize and approve governmental expenditures, including, of course, appropriations intended for the use of Crown corporations. Bill C-24, an Act to Amend the Financial Administration Act (September 1984), has strengthened and expanded the powers of Parliament relative to Crown corporations in such areas as the initial mandating of Crown corporations, subsequent amendments to such mandates, and the auditing and scrutiny of the financial performance of Crown corporations. It is generally agreed, however, that the ex-post control measures available to the House of Commons—although essential to assuring the ultimate accountability of the Crown-corporation instrument—do not have any substantive impact on the ongoing government/Crown-corporation decision-making relationship. Langford, for example, notes "The most obvious fact is that Parliament's powers with respect to the policy relationship with Crown corporations are bound to be quite limited."20 Tupper and Doern, noting that "Parliamentary scrutiny of Crown corporations cannot be divorced from the reform of the parliamentary process in general," are equally sceptical about the substantive control of Crown corporations by Parliament; they say that "the prospects of a general parliamentary committee reform strike us as being extremely unlikely."21 However, Johnson emphatically embraces the Lambert Commission's proposals for reform of the parliamentary committee process. Asserting that "Crown corporations must be accountable to Parliament," Johnson makes the case for an arrangement in which Crown corporations are directly accountable to Parliament for their performance, but otherwise enjoy a virtually unspecified degree of independence from the institutional control of the government. 22 According to Langford, "The significant powers (and potential for aggrandizement) in the policy process must be with the Cabinet and individually designated ministers"; it is there, he says, that the "substantive elements of the policy and management relationship between 13

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

Crown corporations, the government, and Parliament have tended to reside."23 I refer, of course, to conventions of ministerial prerogative and responsibility in which ministers, at least in theory, might be imagined to have the same degree of control over a Crown corporation as they apparently have over government departments; thus they would be accountable in Parliament for the Crown corporation in the same manner as for the department. The applicability of such conventions to the Crown-corporation instrument, however, is far from precise. "The very definition of the Crown corporation as a corporation that is ultimately accountable though a minister to Parliament for the conduct of its affairs," notes Lloyd D. Musolf, reveals both the "centrality" and the "ambiguity" of such conventions. Ministers serve as the "link" between Crown corporations and the body to which both are "ultimately accountable"; yet ministers cannot be held "fully accountable for Crown corporations in the same fashion as for ordinary administrative activities."24 The 1984 federal government C-24 legislation and regulations extended the prerogatives of cabinet ministers relative to the functioning of Crown corporations. New ex-ante control devices included expanded appointment powers, binding policy directives, and ministerial approval of corporate strategic plans and capital and operating budgets. This extension of ministerial prerogatives was not, however, accompanied by any clarification of the ways in which ambiguities in the application of conventions of ministerial responsibility to Crown corporations might be ameliorated. Johnson, who opposed this enhanced ministerial "reach," contended that "the very rationale" of the Crown corporation provides for the responsibility to be conferred on "a corporation of the Crown, not a minister"; that "the convention of ministerial responsibility, as it applies to departments, could never have been intended to apply to Crown corporations."25 There is, of course, yet another category of would-be "controllers" of Crown corporations: bureaucratic intermediaries, whose influence may have been elevated somewhat by the C-24 regime's requirements for the ex-ante review of corporate strategic plans and budget requests. Scholarly accounts of the effects of these control measures on the federal government/Crown-corporation decision-making process are not yet available. I refer, therefore, to the comments of several observers of this process, as they sought to anticipate the effects of such measures on the eve of their implementation. M. J. Trebilcock and J. R. S. Prichard argue that one such effect might be that the review of corporate strategic plans and budget requests would substantially "elevate the role of bureaucratic inputs in 14

The Autonomy and Control Problem the decision making processes of Crown corporations." With "so centralized a bureaucratic perspective on the review process," they say, "the sui generis considerations that led to the creation of many Crown corporations are likely to be substantially depreciated."26 Langford, too, believes that "the largely bureaucratic environment of a central agency" might erode "the central element of the corporate form."27 But not everyone contemplating the effects of these new control measures is concerned solely with imminent bureaucratization of Crown corporations. To Tupper and Doern, for example, the most important thing is to be able to synchronize such control measures with the existing central-agency decision-making process, the general idea being that all Crown corporations ought to be "ultimately domiciled" in a "home" policy field or ministry.28 Explanations of the monitoring and control of corporate performance in the private sector, unlike Crown-corporation control rationales, need not come to grips with the issue of sovereignty. From a strict entrepreneurial perspective, it is conventional to reason that because to earn profit and economically benefit the proprietors of the firm is a logical objective for any corporation, control of internal efficiency and market profitability is at the heart of an effective monitoring effort. Technical explanations of corporate performance-monitoring processes emphasize the availability of a plethora of advanced measurement and computational models and techniques, all of which require copious amounts of information. The Galbraith information-processing model of organization design, for example, reduces the choice of a monitoring strategy to a choice of information-processing strategy, which is also a choice of organizing mode. This model, however, is strictly technical in orientation. It does not, unlike managerial theories of the firm, take into account differences in the incentives, self-interest, and behaviour of different kinds of corporate decision makers (owners, managers). In this respect, the Chandler/ Williamson multidivisional form of corporate organization —in which the corporate head office exerts a powerful monitoring role over its divisional agents—has a number of distinct advantages from the standpoint of the control of discretionary managerial behaviour. What the Galbraith and Chandler/Williamson models do have in common, of course, is that the success of the monitoring and control effort is greatly influenced by choice of organization design. The Galbraith information-processing model of organization design posits a link between information processing (which links the monitoring effort to organizational decision making) and organizational efficiency (including the efficiency of the monitoring process). The 15

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

key concept, according to Galbraith, is that "decision makers require information during task execution," implying continuous and contemporaneous monitoring as opposed to a leisurely ex-post evaluation of organizational performance.29 Because, in Galbraith's model, the hierarchy becomes "overloaded" with information and the quantity of information "overwhelms" decision makers, the organization must adopt a strategy either to reduce the information necessary for coordination or to increase its ability to process more information (the two basic information-processing objectives available to any organization, as noted earlier). Although, in the case of information-processing strategies supporting the first objective, the monitoring process is not dispensed with, the information-processing strategies supporting the second objective are most germane to a discussion of the significance of organization design in the monitoring and control of corporate performance. Two information-processing strategies support the second objective: (1) investment in vertical information systems; and (2) creation of lateral relations. As noted earlier, the key difference between these two strategies is that the former seeks to increase and centralize monitoring and control capacities, while the latter seeks to increase but decentralize such capacities. Investment in vertical information systems, says Galbraith, involves the use of vertical communication channels "to bring information up to the point of decision," and then redirect it to the appropriate place in the hierarchy for task execution. As such, this strategy constitutes an archetypical centralized monitoring-and-control strategy. It posits a central decision point, at which global information is exploited, so as to increase the planning and computational capacities of the organization to deal with the coordination of interdependencies. Because this strategy results in continuous movement of information up and down and back and forth within the vertical communication channels of the organization, however, these channels become "congested" and "information loss" occurs. If such is the case, says Galbraith, the horizontal communication devices of the lateral relations design can be introduced. These devices rescue monitoring and control from the "congestion" and "overload" often experienced within the vertical information systems design; they ensure that "all information is included in the process" and that there is no "information shrinkage."30 In the Galbraith model, the choice of an information-processing (monitoring and control) strategy is contingent upon the efficiency of the strategy. "There is no one best way to organize," says Galbraith; each design strategy has its own "effects" and "costs." His model thus reduces the choice of organization design to a deliberate calculus 16

The Autonomy and Control Problem of "optimization," a process that forces the calculation of the "costs" and "benefits" of alternative design strategies that culminate in the choice of "the strategy which produces the desired effects at the least cost."31 This model, however, is entirely devoid of any qualitative insights with respect to the "desired effects" of alternative organization designs. It does not take into account the very existence, much less the qualitative decision perspectives, of the various kinds of decision makers within organizations. To gain more of a qualitative perspective on the monitoring and control of corporate performance, it is necessary to refer to another order of explanation. Managerial theories of the firm are departures from the traditional micro-economic theory of the firm in the sense that they posit alternative managerial objective functions to that of profit maximization. These theories question whether corporate managers actually set out to maximize profits. Although this may be a logical objective for owner-proprietors, is it an equally logical objective for managers of large corporations in which a separation of ownership and control occurs? Williamson, commenting on discretionary managerial behaviour, suggests that "non-owner managers will pursue objectives other than maximizing profit"; that "the most likely alternative to profit maximization is "the maximization of the manager's own utility (salary, perquisites, etc.)." The extent to which this might happen, he says, "depends on the degree of control which the owners of the firm have over managerial actors."32 Separation of ownership and control, the dispersal of ownership first described by Adolph Berle and Gardiner Means as the dilemma of control faced by the modern business corporation, is often discussed as the "agency" problem; an agentprincipal relationship in which corporate management is the "agent" and the owners of the corporation are the "principal." Williamson does not pretend to have disposed of the "troublesome issues" raised by Berle and Means. EJut he is critical of managerial theories of the firm because they have "neglected the importance of organization form differences" in their analysis of the corporate control dilemma and assumed, for the most part, "the functional or unitary form of corporate organization."33 In Corporate Control and Business Behaviour, he sets out to elucidate the contribution of the M-form to the control-loss experienced by the U-form. He directs his attention to several areas of improvement, most notably the strategic planning function and the internal compliance process. The strategic decision-making function, according to Williamson, is "solved" in the M-form. This is so, he thinks, because the function is assigned to a "team of top executive generalists, removed from operating decisions" and supported by an "elite staff" capable of 17

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

performing the in-depth analysis required to counter the "partisan functional interests" at the heart of the U-form control-loss problem. This separation of strategic and operating decisions, in which the quasiautonomous divisions function as "profit centres," frees the general executives and staff specialists in the corporate head office to concentrate upon genuine "enterprise viability" concerns.34 They can focus, for example, on long-term strategic planning, resource allocation among the operating divisions, and the monitoring and control of corporate performance. Because of these improvements, Williamson argues, the M-form can exercise the internal compliance machinery more effectively than its U-form counterpart. This is partly because the presence of the corporate head office means a greater capacity for performance checks. Also, comparative evaluations of divisional performance can be approached in terms of the common denominator permitted by the profit centres of the M-form, rather than the intrinsically different outputs complicating the evaluation of the performance of the functional divisions of the U-form. It is generally acknowledged that the M-form significantly reduces opportunities for discretionary behaviour on the part of corporate management at the divisional level. It is not clear, however, if the proprietors of a multidivisional corporation are uniquely advantaged with respect to the control of corporate performance as a whole, including, of course, the performance of the corporate head office. Williamson reduces this question to a function of competition in capital markets. He asks if the shareholders of an M-form are more able than the shareholders of a U-form to express dissatisfaction with the performance of the enterprise by divesting shares, thus affecting the market value of the company and placing a constraint on the behaviour of top managers. This point, however, does not emerge with any great clarity in his analysis. Indeed, his conclusion reduces itself to the proposition that "internal organization and conventional market forces are complements as well as substitutes: the two exist in a symbiotic relationship with each other."35 It is not definitively known, in other words, who (or what) controls the "controllers" of the M-form. Not all of the literature dealing with the subject of Crown corporations in Canada approaches the control of Crown corporations by the government from the standpoint of the government as sovereign. Gordon, for one, examines Crown-corporation accountability and control from the standpoint of the government as entrepreneur. In Government in Business, she equates the effective monitoring and control of Crown-corporation performance with the achievement of "economic and managerial efficiency," a focus in which the efficiency of the enterprise is deduced from its profitability. Her basic concern is the 18

The Autonomy and Control Problem lack of a strict "bottom line" (profitability test) with which to evaluate corporate performance. Because Crown corporations "must respond to both public policy and commercial objectives" (the former usually ill-defined), she argues that managing a Crown corporation is more difficult than running a private corporation and that its performance, moreover, is more difficult to evaluate. Her prescription is to urge the "commercialization" of Crown corporations; that is, to eliminate public-policy objectives whenever possible. Where this is not possible, she prescribes the use of binding policy directives to specify noncommercial objectives and the financial compensation of Crown corporations for costs incurred in the pursuit of such objectives.36 Gordon's analysis addresses one critical dimension of the government's preferences as entrepreneur: the idea that governments prefer more, rather than less, efficiency in the operation of Crown corporations. To think of efficiency as the primary objective, however, and to think of profitability as the sole measure of that objective, is to indulge in a highly speculative, contradictory logic. Ray Rees, in Public Enterprise Economics, points out the basic contradiction. In general discussion, criticism of the performance of public enterprise usually centres on their losses or, if profitable, on the levels of their prices. There is naturally something of a contradiction here, when both losses and profits arouse public criticism. It suggests a general presumption that public enterprises are in some sense inefficient. Losses are then taken as an indicator of the inefficiency while profits are regarded as having been generated by the use of monopoly power in pricing, rather than, as would be the case for a price-taking competitive firm, superior efficiency.37 Gordon, putting aside contradictions, addresses the problem of the "principal's" relative inability to articulate its preferences to the "agent" in the form of clearly defined objectives, thus making it difficult to monitor and control Crown-corporation performance. This problem is also discussed in the Economic Council of Canada's Minding the Public's Business, as the problem of "inadequate direction." But Gordon does not consider the possibility that failures can occur in the monitoring and control of government enterprises that allow those within them to operate in their own self-interest, a situation that may well be exacerbated by the very factors she has managed to identify. Several other economists interested in Crown corporations in Canada have addressed this aspect of the Crown-corporation "agency problem" as well. Proponents of the "property rights" approach to the comparison of 19

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publicly and privately owned firms highlight a fundamental difference between these two types of ownership that characterizes, in their view, the basic agency problem of government-owned corporations. In government enterprise, quite simply, ownership claims are not transferrable. In the private sector, however, they are, and that becomes a factor thought to strengthen incentives for owner control by encouraging specialization in ownership. Because such transferability is not available to the principal in the case of government-owned corporations, Trebilcock and Prichard note that "there is no cohesive set of individuals who stand to be advantaged by more efficient, rather than less efficient, monitoring." To the extent that future consequences of improved management are not capitalized into the present wealth of shareholders, they argue, "monitoring incentives are weakened."38 The above distinctions, however, only tell part of the story. It does not necessarily follow that Crown-corporation managers have greater opportunities for discretionary behaviour than managers of privately owned corporations. Scholars interested in government-enterprise economics point out that issues arising from the dispersal of ownership and control in large-scale private corporations are not perfectly resolved. They also note the existence of alternative monitoring and control mechanisms more appropriate for (or at least intrinsic to) addressing the agency problems of government-owned corporations. Rees, for example, points out that "the difference is one of degree and not of kind." He believes that the "market in corporate control" may not always function perfectly and that private shareholders in large companies might find it costly and difficult to monitor corporate management and assure themselves that decisions are entirely in their interest. Moreover, says Rees, the competition between political parties for taxpayers' support "may make the control of public enterprise to some extent responsive to their interests."39 Trebilcock and Prichard, in a similar observation, note the danger of oversimplifying the incentive structure facing the political overseers of government-owned corporations. "While there may be no economic return to efficient management," they say, "there are presumably political returns." They caution, however, that the ultimate shareholders in government enterprise (voters) have such "small stakes" in the effective management of such enterprises, and face such high information costs when ascertaining which is the case, that "penalties attaching to weak monitoring in the public sector are significantly less exacting than those obtaining in the private sector."40 Thomas Borcherding, reflecting on the "gain-splitting" nature of public monitoring activities, argues that some monitoring is naturally required to keep public managers from squandering the wealth of the 20

The Autonomy and Control Problem firm. He notes that bureaucratic rules and red tape can be seen as "attempts to reduce the discretion of non-proprietary managers in government enterprise." 41 For the Economic Council of Canada's Hirshhorn, however, the monitoring and control mechanisms available to address the agency problem in government enterprise are much more diffuse. He compares them, in fact, to those used within the multidivisional form of corporate organization: Distinct mechanisms do exist to enforce the desired pattern of behaviour by managers of government corporations. In place of ownership specialists are administrative specialists within a government who monitor the activities and performance of public enterprises on behalf of their political masters and the corporations' ultimate owners ... The CEO of a government enterprise is analogous to the divisional manager within a multidivisional organization, and the officials within the government departments to which they report are analogous to the central staff within corporate headquarters. Like the latter, government officials have the responsibility and the resources to monitor management performance.42 Despite the fact that bureaucrats and politicians are themselves "agents" with objectives distinct from those of the ultimate "principal," Hirshhorn argues that it is not obvious that Crown-corporation managers have greater opportunities for discretionary behaviour than their private-sector counterparts. It is reasonable, says Hirshhorn, to expect that these monitoring agents will be motivated by a combination of "pecuniary and non-pecuniary" incentives and that their performance as monitors will have "an inverse association with monitoring costs" (the lower the monitoring costs, the higher the level of performance). Moreover, says Hirshhorn, Crown-corporation managers will be "sensitive to the monitoring exercise," since the results are likely to impact on the degree of corporate autonomy they enjoy. Where monitoring costs are low, notes Hirshhorn, as in the case of Crown corporations involved in commercial activities in commercial markets, the opportunities for managers to pursue their own personal interests are "likely to be limited."43 There remain, however, what Hirshhorn calls the "bureaucratic and political factors." Not only are organizations seldom passive agents of public policy, but government enterprise managers have their own "distinct perspectives" on their corporation's role in serving the public. Biases can occur, says Hirshhorn, as the organization is "deflected" from its proclaimed objectives toward the goals supported by the 21

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managers. Such biases, he says, "may not be an aspect of the agency problem faced by the government, but rather a consequence of the political interactions and the particular perspectives of the actors involved."44 The Economic Council of Canada, in Minding the Public's Business, reminds the student of public enterprise that "in a public, unlike a private, firm, corporation management is not the sole recipient of delegated power and not the only source of control problems." Noting that "weaknesses in the arrangements by which ministers account to Parliament have been an issue of particular concern" and that "there is a basis for the concern that departmental (bureaucratic) monitors can become advocates," the Council describes what Hirshhorn calls "bureaucratic and political factors" as the problem of "controlling the controllers" in government enterprise.45 OPTIMIZING THE BALANCE: AUTONOMY AND CONTROL Although traditional literature concerning Crown corporations in Canada casts the balancing of autonomy and control as a "standard" issue, it does not succeed in resolving the problem. Despite this shortcoming, the literature contains no dearth of interpretations prescribing the essential substance of the government/Crown-corporation relationship. That is, it lays out the kinds of decisions that ought to be made by the government, on the one hand, and by individual Crown corporations, on the other. Such prescriptions arise, one way or another, out of a classic distinction in public administration between "political" (policy) and "administrative" decisions. This distinction is traditionally held to apply (alternatively denounced, as the case may be) to decision making within conventional departmental bureaucracies. Amended, however, to include semantic genuflection to the corporate form of organization, it is often carried over into the area of Crown corporations. Some authors prescribe a strict separation between the "policy" and "managerial" dimensions of the government/Crown-corporation relationship, while others prescribe a more explicit balancing of autonomy and control within the "policy" dimension of the relationship. The Morrisonian "arm's-length" formulation, as noted earlier, differentiates between the "commercial" domain of Crown corporations, on the one hand, and the "policy" domain of ministers and the government, on the other. It prescribes, in other words, that the minister not interfere in the "day-to-day management" of the corporation. Implicit in this formulation is the notion that a strict separation between the "policy" and "political" domain of the government and the "commercial" and "managerial" domain of the Crown corporation will 22

The Autonomy and Control Problem somehow permit the required flexibility of decision making by Crown corporations, yet not inhibit the effective monitoring and control of Crown-corporation performance by the government. The prescriptions of this formulation are rarely articulated in a more explicit fashion than by Gordon in her analysis of the Government in Business. Throughout her analysis, Gordon argues the case for a "clearer separation" of "government-directed" and "normal" corporate activities in government enterprise. This is necessary, she says, to maintain the "delicate balance" between running a business and responding to the policy goals of the government of the day. Because Crown corporations have the corporate form of organization, Gordon explains, governments must delegate the day-to-day commercial policy and administrative decisions to corporate management and the board of directors. The critical part of her argument, from the standpoint of the balancing of corporate autonomy and institutional control, is contained in her comment that "the onus is on the government to define goals clearly for its enterprises while leaving operational decisions to management." According to Gordon, the "balancing factor" is that once goals have been clarified, corporate management can then be "held accountable—to the government and to the Canadian people, through Parliament—for the execution of assigned goals."46 Her framework, because it clearly places the onus for the "policy" component of the government/Crown-corporation relationship on the government and the "management" component of the relationship on Crown corporations, unambiguously incorporates the prescriptive essence of the Morrisonian "arm's-length" formulation. Although the Gordon analysis makes an enthusiastic case for the corporate autonomy of Crown corporations in the commercial domain, it does not make an equally enthusiastic case for the institutional control of Crown corporations in the policy domain. On the one hand, Gordon's analysis portrays a chronically disorganized "principal," one charged with the responsibility to articulate clear-cut objectives to the "agent," but whose own policy objectives defy objective articulation. On the other hand, her analysis portrays a highly organized and intrinsically rational "agent," whose performance can be measured, so long as its commercial objectives are not obscured by the policy objectives of the "principal," yet who does not apparently formulate any of its own objectives. An essential weakness of this analysis, as noted earlier, is that it overstates the cruciality of commercial objectives and criteria (profitability) in the evaluation of Crown-corporation performance, while understating the cruciality of non-commercial objectives and criteria, which may be more measurable than Gordon implies. Nor does the Gordon analysis recognize weaknesses in the 23

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monitoring process that might allow the "agent" to operate in his own self-interest, as distinct from the interests of the firm. Jeanne Laux and Maureen Molot, in State Capitalism: Public Enterprise in Canada, speculate that the trend toward the "commercialization" of Crown corporations, of which Gordon is an outspoken advocate, has "exacerbated the classic tension in public enterprises between managerial autonomy and policy direction." They elaborate upon this generalization, which they derived from "bureaucratic, systemic, and ideological axioms," as follows: "The tractability of the commercial corporation as an instrument of public policy in the mixed economy tends to diminish over time, we conclude, both because managers seek to enhance their discretionary powers and because policy objectives are rarely synonymous with those derived from purely commercial considerations."47 It would be misleading to think that the strengths or weaknesses of the Gordon analysis either validate or invalidate, by extension, the Morrisonian formulation's implicit balancing of corporate autonomy and institutional control. In any case, Gordon's analysis is at least not hostile to the notion of balancing corporate autonomy and institutional control. Neither, of course, is Laux and Molot's analysis, with its articulated preference for a more, rather than less, "tractable" government/ Crown-corporation decision-making relationship. Johnson, on the contrary, comes very close to arguing that both the policy and managerial dimensions of the relationship ought to be domiciled within Crown corporations. Asserting that the Crown corporation is "accountable, not only for the realization of its commercial objectives but also for the public-policy objectives that gave rise to its creation," Johnson argues that it is the corporation of the Crown, rather than the ministers of the Crown, that should be "responsible for reconciling, or harmonizing the conflicting objectives which are the corporation's raison d'etre." Such trade-offs must be performed, he says, within the mandate Parliament has conferred upon the corporation, although the "continuing day-to-day responsibilities for interpreting and applying Parliament's mandate, whether it be general or more precise, remain with the corporation." The question, says Johnson, is "how to adapt the institutions of Parliament and of the government to this new policy instrument, rather than to adapt the new policy instrument to the institutions—which were developed with ministerially directed agencies in mind."48 His prescription—that the "reach" of the minister and "related policy processes" (central agencies) be reduced and that Parliament serve as the premier instrument of institutional control—makes the monitoring and control deficiencies of the Gordon framework seem trivial by comparison. Trade-offs 24

The Autonomy and Control Problem between commercial and public-policy objectives would be domiciled almost exclusively within Crown corporations, with only minuscule sharing of the "policy" dimension of the government/Crown-corporation decision-making relationship occurring with the government. While Johnson urges that governmental institutions adapt to the Crown-corporation instrument, Tupper and Doern ask why Crown corporations should not adapt to the "related policy processes" of the government. The "reality" of policy decision-making, say Tupper and Doern, is not only that "there is a plurality of processes in which public corporations (as well as others) must interact," but also that the "managers of public enterprises must learn how to live with the ambiguity" of such processes, including the "performance preferences" articulated therein. These processes, according to Tupper and Doern, include federal-provincial relations, international relations, the expenditure-taxation-revenue process, and the corporation's "home" policy field or ministry. Moreover, say Tupper and Doern, if a Crown corporation gets into "political trouble," its minister will "bear the brunt of parliamentary and media criticism" regardless of the formal, arm's-length reporting-relationship. Thus, Crown corporations are "increasingly subject" to their own ministers' political priorities as well as to the pressure, often coming from other ministries, to have the Crown corporation function as a model corporate citizen; that is, to be "sensitive" to the central policy process established and articulated by the government.49 The Tupper and Doern analysis elucidates how the interests of a federal government Crown corporation might be served, in the empirical sense, by adapting to the "related policy processes" of official Ottawa. But it does not differentiate between the policy and management dimensions of the government/Crown-corporation decisionmaking relationship, or consider the effects such adaptation might have on the managerial functioning of Crown corporations in the commercial domain. Indeed, Tupper and Doern could well be prescribing the adaptation required by conventional departmental bureaucracies to the "reality" of "related policy processes," instead of an instrument which, in theory, has an arm's-length relationship with the government. Their argument that Crown corporations "fit in" with the "related policy processes" of the government is the obverse of the Johnson argument, and is equally hostile to the idea of achieving a balancing of corporate autonomy and institutional control within the "policy" dimension of the government/Crown-corporation relationship. While Johnson inveighs against substantive policy harmonization between Crown corporations and the central institutional framework of the government, Tupper and Doern decree it. 25

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Langford, far from being hostile to the idea of balancing corporate autonomy and institutional control, urges students of public policy to "direct (their) attention to the problem of balancing the need to make Crown corporations act as instruments of public policy with the need to provide them with a level of autonomy sufficient to assure their efficient operation." This problem, says Langford, has been too "narrowly defined." He says it has focused on questions pertaining to the management and efficiency of Crown corporations and to their accountability for managerial and operational performance, rather than on questions of "results, effective performance, and the policy direction of Crown corporations." He argues that the question, from the policy standpoint, is how Crown corporations "... can be made to act as instruments of public policy rather than in the interest of the corporation itself." His answer would be to enable Crown corporations to achieve "harmony with the intentions of the central policy-making machinery" of government, but "without destroying the essential character of the corporation as a management tool."50 Langford's analysis defines the "policy" dimension of the government/Crown-corporation decision-making relationship as one centring on the concepts of "direction and evaluation," as distinct from the "bureaucratic" concepts of "control and accountability" that characterize the "managerial" dimension of the relationship. He examines the "breakdown of a model" in the policy direction of Crown corporations, one in which mechanisms for policy direction were being "underemphasized and underutilized" while the spotlight focused on "management control and surveillance" of Crown corporations. Highly critical of reform proposals that have the effect of reducing the autonomy of Crown corporations without addressing the policy framework within which most Crown corporations operate, Langford prescribes that "only a policy relationship founded in large part upon formal consultation," as opposed to mechanisms of governmentapproval powers, will give Crown corporations "a sufficient share of the policy authority to assure the viability and flexibility of Crown corporations as vehicles of implementation."51 Langford's prescriptions, more than any others within the traditional literature dealing with Crown corporations in Canada, are explicitly oriented to strengthening the institutional control of Crown corporations in the policy and political domain without obviously undermining the corporate autonomy of Crown corporations in the commercial and managerial domain. His framework stops short, however, of advancing specific analytical criteria with which to evaluate the state of the balancing of corporate autonomy and institutional control. Thus, while 26

The Autonomy and Control Problem he speaks of the "autonomy that the Crown corporation requires as an organizational form to perform the task it has been given," he advances no method of judging the "correct" amount of corporate autonomy required by Crown corporations in the commercial and managerial domain. Similarly, although he speaks of the "government's need to control and direct the corporation and Parliament's need to oversee or scrutinize it," he presents no way of judging the "correct" amount of institutional control required by the government in the policy and political domain. Thus, although his insights are germane to fashioning a "desirable" balancing of corporate autonomy and institutional control, they cannot be used to fashion an "optimal" one. Corporate organizational theory approaches the question of balancing autonomy and control in the decision systems of large-scale corporate organizations from two distinct perspectives. The first is the explicit optimization perspective adopted by Galbraith, in which the degree of autonomy is contingent upon the costs and benefits (the efficiency) of alternative information-processing and organization design strategies. The creation of self-contained units, in Galbraith's model, is an archetypical decentralization strategy. And investment in vertical information systems is an archetypical centralization strategy. The creation of lateral relations incorporates certain properties of both these strategies. A fourth information-processing and organization design strategy enumerated by Galbraith—one we do not examine in any detail because it is neither an autonomy nor control strategy—is referred to by Galbraith as the creation of "slack resources." This strategy supports the objective of reducing the information-processing requirements of the organization by reducing performance standards but is also, by definition, the "automatic" design choice if none of the other three design options are chosen.52 Decisions as to organization design are made in accordance with the basic information-processing requirements of the organization, whether those be (1) to reduce the amount of information processing required to coordinate the activities of the organization; or (2) to increase the capacity of the organization to process greater amounts of information. The analytical criteria informing Galbraith's calculus of optimization supporting choice of organization design (and hence the optimal balancing of autonomy and control) are summarized in Table 1. In Galbraith's model, the choice of an organization design is contingent upon the efficiency of the strategy, notably the monitoring costs incurred in its implementation. "There is no one best way to organize," says Galbraith, but "any way of organizing is not equally effective," thus summing up his own interpretation of the contingency theory of 27

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TABLE 1 ORGANIZATION DESIGN OPTIONS INFORMATION-REDUCTION STRATEGIES 1 . CREATION OF SLACK RESOURCES

Reduces the amount of information processing required during task execution by reducing performance standards or increasing available resources. If none of the other three design options is chosen, this strategy will be the automatic design choice of an organization. Benefits

Costs

• Creates additional (slack) resources by reducing performance standards.

• Reduces level of performance, by definition, which means higher production costs and lower efficiency.

• Avoids start-up costs likely to be incurred by alternative design strategies.

2. CREATION OF SELF-CONTAINED UNITS (VERTICAL DECENTRALIZATION)

Reduces information-processing requirements by having individual units handle a category of production on their own. The units mainly use their own resources for such production, sharing few resources and little information. Benefits

Costs

• Less information processing required to conciliate and coordinate demands for shared resources, because sharing is largely eliminated.

• Possible proliferation of selfsufficient resource groups, which can result in duplication of resources and violation of economies of scale.

• Movement of the point of decision closer to the source of information resulting in shorter and less congested communication channels, because few resources are shared and tasks are performed more or less independently.

• Limits to the degree of selfcontainment (no group can be completely self-contained or it would not be part of the same organization).

ENHANCED INFORMATION-PROCESSING STRATEGIES 3. INVESTMENT IN VERTICAL INFORMATION SYSTEMS (CENTRALIZATION)

Increases the capacity of the organization to process greater amounts of information, through the improvement and addition of vertical communication channels and information collection and processing resources.

28

The Autonomy and Control Problem TABLE 1 (continued) ORGANIZATION DESIGN OPTIONS 3. INVESTMENT IN VERTICAL INFORMATION SYSTEMS (continued)

Benefits

Costs

• More efficient information processing, through the systematic use of vertical communication channels (thereby bringing information up to the point of decision, and then re-directing it to appropriate places in the hierarchy for task execution).

• Start-up and overhead costs of acquiring and maintaining information collection and processing resources.

• Introduction of a central decision point for exploiting global information, thereby increasing the planning and computational capacities of the organization to deal with the coordination of interdependencies.

• Congestion of the vertical communication channels (stemming from repeated movement of information up and down within the hierarchy), which result in information loss or distortion.

4. CREATION OF LATERAL RELATIONS (HORIZONTAL DECENTRALIZATION)

Increases the capacity of the organization to process greater amounts of information by making use of the "informal" organization, thereby achieving a sharing of information and stimulation of joint decision making at various levels of the organization. Benefits

Costs

• More efficient information processing through the improvement and addition of horizontal communication channels and devices (to move decision making down to where the information exists rather than bring it up to the point of decision making).

• Greater amounts of managerial time spent in group processes; the overhead expense of liaison and integrating roles.

• Reduction of pressure on existing vertical communication channels, due to information sharing and joint decision making in lateral relations processes, the result being less congestion and information loss.

• Possible interference of lateral decision processes with existing vertical decision processes, giving rise to a number of complicated communication and authority problems within the official hierarchy of the organization.

29

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organizational analysis.53 Nevertheless, his model, however useful it may be in conceptualizing how organizations might calculate the efficiency effects of trade-offs involved in the optimal balancing of autonomy and control, is essentially one-dimensional. For one thing, the substantive content of its information and decisions is never at issue. Also, its decision makers are selfless and invisible, while the "desired effects" of alternative organizing modes are purely instrumental and devoid of any substantive implications. It is necessary, of course, to augment Galbraith's insights regarding the optimal balancing of autonomy and control with insights of a more substantive variety. For instance, in the Chandler/Williamson multidivisional model (the M-form), discussed earlier, an implicit balancing of autonomy and control stems from the structural differentiation existing between strategic and operational decision categories and responsibilities. Chandler, in his introduction to Strategy and Structure, observes that "it seems to be wise to emphasize the distinction between the formulation of policies and their implementation." As for policy formulation, his substantive decision categories include "strategic" decisions, which are concerned with the "long-term health of the enterprise," and "tactical" decisions, which deal with the "day-to-day activities required for efficient and smooth functioning" of the organization. To these, Chandler blends "entrepreneurial" decisions, which "affect the allocation or reallocation of resources for the enterprise as a whole," as well as "operating" decisions, which are "carried out by using resources already allocated." As for policy implementation, "entrepreneurs"—the "key men in any enterprise," who are located within the "general office" — are responsible for making the "strategic" or "entrepreneurial" decisions. "Managers"—those obliged to "coordinate, appraise, and plan within the means allocated to them" at the divisional level—are responsible for making the "tactical" or "operating" decisions.54 Williamson, in the "The M-form Hypothesis," refines Chandler's decision categories and responsibilities. He places "the broad strategic decisions" concerning the allocation of existing resources and the acquisition of new ones into the hands of a "top team of executive generalists," supported by an "elite staff" attached to the corporate head office. Each quasi-autonomous operating division consists of a "self-contained organization having complete jurisdiction over (operating matters) and ordinary everyday questions of policy," under "certain limitations" and "subject to the control of the central authority." In this structure, says Williamson, "the central organization deals almost exclusively with questions of policy ... and refrains from entering into questions of operating detail except in such cases where 30

The Autonomy and Control Problem the two are inseparable.'" Thus acknowledging the essential elusiveness of any pure distinction between "policy" and "implementation," Williamson opts for a variant of this distinction. He assigns responsibilities for "strategic" and "operational" decision making as follows: "1. The responsibility for operating decisions is assigned to (essentially self-contained) operating or quasi-firms. 2. The general office is primarily concerned with strategic decisions involving planning, appraisal and control, including the allocation of resources among (competing) operating divisions.55" Unlike Chandler, who proceeds from a formal set of definitions with which to distinguish between "policy" and "implementation," Williamson derives his decision categories using a process-based distinction. But the outcome, as Williamson obliquely acknowledges, is much the same in either event. It implicitly posits a dichotomy between "ends" and "means" in decision making: the strategic representing the "ends," and the operational representing the "means." He acknowledges, in other words, that the logical dimensions of the substantive elements of the M-form hypothesis are not irrefutable. Nevertheless, he firmly cautions that any intervention by the corporate head office in the affairs of the operating divisions "needs to be done with care lest the quasi-autonomy of the operating divisions be upset, which would violate the structural integrity of the organization form."56 This is Williamson's key prescription —his lynchpin for preserving an optimal balancing of autonomy and control. The analytical dimensions of the Crown corporation as a problem in organization design, discussed in the foregoing as the optimal balancing of autonomy and control, are simply not addressed within the traditional Crown corporation literature. Some of the more recent economic literature dealing with the subject of Crown corporations, however, does incorporate an explicit optimization perspective. Hirshhorn, as noted earlier, seeks to relate the implicit balancing of autonomy and control of the M-form to the problem of achieving a balance in kind within the government/Crown-corporation decisionmaking relationship. He views the flexibility of decision making by Crown corporations as analogous to the operating autonomy of the quasi-autonomous divisions of the M-form; he also sees the effective monitoring and control of Crown-corporation performance by the government as analogous to the corporate head office of the M-form. As well, he advances a formula for determining the optimal balancing of corporate autonomy and institutional control within a decentralized government/Crown-corporation decision-making relationship. He comments: "In the public as well as the private sector, the optimum degree of autonomy is likely to vary, depending on the adequacy of the 31

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performance and control measures that are available. If we think of autonomy as a variable which can be increased or decreased as desired, then the optimum is reached when the marginal gain no longer exceeds the marginal cost of a further delegation in responsibility."57 This formula, which is elaborated upon in the Economic Council's Minding the Public's Business, poses, in the fashion of Galbraith, a calculus of optimization in which the degree of autonomy delegated to Crown corporations is contingent upon the efficiency of the delegation. The "gains" of a further delegation of responsibility, says Hirshhorn, constitute reduced decision-making demands on politicians and senior bureaucrats, along with any improvements in the quality of decision making stemming from the existence of shorter and less congested channels of communication. According to Hirshhorn, the "costs" of such delegation are the resources devoted to monitoring the management of Crown corporations, along with any remaining losses, because such monitoring will necessarily be incomplete.58 Unlike Galbraith, Hirshhorn poses certain qualitative limits to the calculus of optimization. Thus, while a "rational" division of responsibilities (as in the M-form) contributes to "efficient information gathering and processing," the costs of such delegation will be "exorbitant" if the accompanying "agency problems" are not addressed by means of effective monitoring and control. If, on the other hand, the monitoring and control is overly stringent, "the degree of monitoring may be so great as to deny the entity the minimum degree of independence it requires."59 In the public as well as the private sector, says Hirshhorn, the costs and benefits stemming from a delegation of decision-making responsibilities must be balanced. It is by "researching the connection between transactions-costs and the characteristics of alternative organization structures," notes Hirshhorn, "that an understanding of the appropriate role of government enterprise will be attained."60 This approach is germane to understanding the analytical dimensions of the Crown corporation as a problem in organization design. It is of little use, however, in reaching an improved understanding of the behaviourial dimensions of the problem.

32

Chapter Two A Positive Perspective: The Game Analogy INTRODUCTION TO THE GAME ANALOGY Because Crown corporations have the same organizational form as their private-sector counterparts, it is tempting to think that theories and models developed to explain organizational structures and decision making in private-sector corporations can be applied to public-sector corporations. However, to apply such theories and models uncritically is to overlook the fact that members of private- and public-sector organizations behave and make decisions according to different incentives systems and structures. We need to ask how decisions are actually made in and around Crown corporations, not how they "ought" — according to corporate organizational theory—to be made. Crowncorporation decision makers will not necessarily behave and make decisions that conform with the "optimality" rules prescribed, for example, by the Economic Council of Canada. Instead, we must imagine them as "players" in a "game," pursuing their own objectives, subject to certain externally imposed constraints: the "rules of the game." This way of viewing decision making in public-sector organizations is known as the "game analogy." It can be viewed as the prime competitor of—but also a complement to—the private-sector corporate analogy favoured by those seeking to achieve an understanding of the Crown-corporation instrument from a normative economic perspective. Because the methodology of the game analogy can vary considerably from application to application, it must be introduced in only the most general, theoretical terms. This perspective, according to D. G. Hartle (an economist and veteran proponent of the game analogy), is only a "crude model," an analogy that offers "a way of looking at the decision-making process," rather than a rigorous model to be used for deriving quantitative predictions. Hartle considers applications of the game analogy to be extensions of "self-interest theories of

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collective decision making," arguing that the advantage of this perspective is that it can purport to be "positive (predictive) rather than normative, although it is difficult to keep normative elements from intruding, even with the best of intentions."1 Many proponents of the game analogy—certainly economists— emphasize the economists' "self-interest postulate," claiming that "no other single behaviourial postulate has as much predictive power" and that it "works better than any other alternative." This postulate, advise Trebilcock, Hartle, et al in The Choice of Governing Instrument, should be taken to mean that "given a choice, rational men will, most of the time, choose the alternative that is expected to yield the most satisfaction (utility) or the least dissatisfaction," a formulation which, in itself, is normatively neutral.2 The point, of course, is that even though many practitioners of the game analogy do not define the term "selfinterest" explicitly, the most interesting questions posed by applications of the analogy are those which seek to chart the instrumental selfinterest (the "objective functions") of different kinds of decision makers. In other words: What utilities do they seek to maximize? How do they seek to maximize those utilities? Hartle and Trebilcock, observing "that complex abstraction called the government," have decided that certain "games" can be usefully differentiated. They contend, in The Choice of Governing Instrument, that the government decision-making process can best be understood in terms of the interaction or interplay of four "distinct, serious, and perpetual games." Their game categories—the "political" game, the "bureaucratic" game, the "special interest" game, and the "media" game—derive from a polycentric factoring of government decision processes. Quite simply, this approach first identifies the various kinds of principal actors in the government decision-making process and then establishes game categories to account for the incentives, selfinterest, and decision perspectives the various players bring to the process.3 My focus is somewhat more limited, concentrating only on that component of government decision-making that is subsumed by the government/Crown-corporation relationship. Although I do not examine the entire government decision-making process, I do take into account the decision perspectives of the different kinds of principal actors inhabiting this component of the process, as well as the incentive systems under which they pursue their self-interest. Mine is a subset of Hartle and Trebilcock's broader "government gamesmanship" framework. But I base it on the positive approximations of normative models of organization design (incentives systems) I use to conceptualize alternative ways of structuring the government/Crown34

A Positive Perspective corporation relationship. As such, my approach differs quite markedly from that employed by Hartle and Trebilcock. It therefore requires some elaboration. Let us begin by using the game analogy to derive the objective functions of the different kinds of principal actors within the Crowncorporation decision-making process—politicians, bureaucrats and corporate actors. We will then proceed to develop a dynamic, rather than a static, framework for analysis, asking such questions as: Where are decisions made (locus) ? What kinds of decisions (substance) are made? and What information is available to support such decision making? Finally, we take into account the influence of organization design as a constraint (a carrier of the "rules of the game") on the maximizing behaviours of different kinds of Crown-corporation decision makers. Using Galbraith's organization design options as a conceptual starting point, we assemble three positive approximations of these normative models of organization design. These Crown-corporation organization designs, like the normative models which inspired them, make different predictions for the balancing of corporate autonomy and institutional control. These predictions also take into account—in fact, are based upon—the incentives, self-interest, and maximizing behaviours of different kinds of principal actors within the Crowncorporation decision-making process. The prime question, from the empirical standpoint, is whether different Crown-corporation organization designs constrain the maximizing behaviours of different kinds of Crown-corporation decision makers to yield different outcomes in terms of the balancing of corporate autonomy and institutional control. The Decision Perspective of Corporate Actors For Hartle, Trebilcock, and other proponents of the game analogy, the key to understanding the decision perspectives of different kinds of principal actors lies in identifying the specific utility the decision maker seeks to maximize. Thus, in the Niskanen framework, for example, bureaucrats seek to maximize the size and rate of increase of the total budget of the bureau for which they are responsible.4 In the Breton and Wintrobe framework, bureaucrats indulge in the "systematic distortion of information" and the exercise of "selective efficiency" in order to maximize their own power.5 In the Hartle and Trebilcock framework, one can best predict the behaviour of bureaucrats by "assuming they will pursue promotion (increasing policy influence) within the system."6 35

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What most of these applications have in common is the assumption that the actual objective of bureaucrats is to maximize the amount of power, or influence, they can bring to bear within the government decision-making process. For corporate actors directly responsible for the management of Crown corporations, however, maximization occurs within a somewhat different organizational context. Crown corporations are more autonomous than conventional departmental bureaucracies. In applying the game analogy to Crown corporations and Crown-corporation executives, this difference must be taken into account. Morton J. Halperin Jr, in "Why Bureaucrats Play Games," draws attention to "the interests of the organization to which (bureaucrats) belong" as determinants of their decision perspectives, one such organizational interest being "the autonomy of the organization." Members of public-sector organizations, says Halperin, attach a high priority to "controlling their own resources" so they can then "spend money allocated to them in the way that they choose" and also "implement policy in their own way." What Halperin argues, somewhat obliquely, is that the relative autonomy of an organization can affect the amount of managerial discretion those responsible for its running perceive as available to them. 7 Using this logic, we can imagine corporate actors within Crown corporations interpreting the "corporate autonomy" of the instrument and its "arm's-length" relationship with the government to mean undisputed managerial discretion for themselves. Laux and Molot, discussing the consequences of the "commercialization" of Crown corporations, make the following observation: "If the ability of governments to use the commercial corporation as a policy instrument tends to diminish over time ... it is because managers seek to enhance their relative autonomy and because outcomes derived from purely commercial considerations will not always be synonymous with the intentions of public policy makers."8 At issue, of course, is the degree of autonomy available to Crown corporations and, thereby, the amount of managerial discretion available to those responsible for their running. Like Laux and Molot, who do not purport to be proponents of the game analogy, we make a basic and preliminary assumption: that corporate actors within Crown corporations seek to maximize their own managerial discretion within the Crown-corporation decision-making process, as well as their own relative autonomy from the overall, governmental decision-making process. Let us qualify this assumption, however, by noting that the decision perspective of corporate actors is conditioned by constraints deriving from the presence of other principal actors (that is, politicians 36

A Positive Perspective and bureaucrats) and also by constraints deriving from the mix of objectives (commercial and non-comrnercial) of Crown corporations. We will return to this topic shortly. Political and Bureaucratic Decision Perspectives The decision perspectives of politicians and bureaucrats, unlike that of Crown-corporation managers, have already been derived within existing applications of the game analogy. Hartle and Trebilcock, for example, posit that "maximizing the likelihood of election or reelection is the proximate objective of political actors."9 This might be taken to mean, as Prichard and Trebilcock have stated, that "while there may be no economic returns (to politicians) to efficient management (of Crown corporations), there are presumably political returns," 10 a comment that tends to correlate politicians' expectations of vote maximization with the efficient management of Crown corporations. Such a correlation, however, does not take into account the possibility, raised earlier, that a perceived abundance of efficiency (as measured by high profitability) might be as politically costly to politicians as the more conventional perception of inefficiency and low profitability. It cannot, therefore, be assumed that politicians will encourage the efficient management of Crown corporations in order to be elected or re-elected. A more reliable way of predicting the behaviour of politicians in or around Crown corporations can be found in Prichard and Trebilcock's concept of "selective responsibility." In particular cases, politicians will find it advantageous to be able to claim credit for activities of government or government agencies where these are positive, but at the same time be able to establish some distance from these activities where there are zero or negative political returns. The Crown corporation structure facilitates this "distancing" to a greater extent than a departmental bureaucracy where the principle of ministerial responsibility severely circumscribes its utilization.11 Hartle and Trebilcock, as noted above, hold that the objective of bureaucratic actors is to maximize their own "promotion (increased policy influence) within the system." I concur. Hartle and Trebilcock also hold that the characteristic mode of interaction between political and bureaucratic actors takes the form of an exchange relationship, in which the bureaucrat "must anticipate what the minister needs in order to pursue his political ambitions and act in such a way as to assist the minister being successful in his own game." Conversely, "the minister 37

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must anticipate what the deputy needs to pursue his bureaucratic ambitions and act in such a way as to make the bureaucrat more successful in his own game." There develops, they say, "a kind of exchange or reciprocity that is based on mutual trust," a conjunction of decision perspectives that is normatively neutral and that constitutes a relatively predictable exchange-relationship between these two types of principal actors.12 What, then, is the potential for such harmonious exchange relationships in or around Crown corporations? If, as suggested by Hartle and Trebilcock, the objective of bureaucratic actors is to maximize their own policy influence and if, as was posited earlier, the objective of corporate actors is to maximize their own managerial discretion and relative autonomy, a state of harmony vis-a-vis the interactions of these two kinds of principal actors is quite unlikely. It is more logical to expect a negative-sum relationship, one in which bureaucratic actors seek to extend their own policy influence into Crown-corporation decision-making at the expense of the managerial discretion and relative autonomy of corporate actors. Although the decision perspectives of these two kinds of principal actors are thus likely to be at considerable variance, it is still possible that those of political and corporate actors might be harmonized, in the fashion of Hartle and Trebilcock's politicians and bureaucrats. Indeed, this would be conceivable if political actors were willing to extend enhanced managerial discretion and relative autonomy to corporate actors in exchange for enhanced sensitivity to their public-policy objectives and political ambitions. Variations in Corporate Decision Perspectives Janet Kelly-Escobar, in Public Administration in Less Developed Countries, argues that the mix of commercial and non-commercial objectives in government enterprise gives rise to variations in the decision perspectives of those responsible for running government-owned corporations. Because government enterprise is a "hybrid," she explains, one that "functions partly as a market enterprise and partly as an extension of the governmental bureaucracy," this difference is reflected in the composition of the management of the enterprise. She identifies, in her article, two basic types of corporate actors: "engineers" and "commissars." She characterizes the engineers as "primarily concerned with running the enterprise like a private business and ... oriented toward profit and growth." The commissars, on the other hand, regard their jobs as "one link in a political career," a view that "cautions moderation and good relations" with politicians and government bureaucrats. While the engineers are "very much like top and 38

A Positive Perspective middle managers of private enterprise" and tend to be "defenders of a commercial orientation," the commissars are "unique to public enterprise" and "sensitive to non-commercial and more narrowly defined political goals."13 Her characterization of the decision perspectives of these two types of corporate actors is worth noting: Engineers, as their name implies, concern themselves chiefly with the direction of the firm. They do not view themselves as social workers. They exhibit the good and the bad qualities of businessmen in general; like managers in private enterprise, they also concern themselves with their own advancement and their personal security with the firm. But engineers do generally see the firm's betterment as in their own self-interest. In short, the engineer is assumed to choose strategies prompted by the same motivations as his colleague in private business, although he does confront a different political environment, which he may have to manipulate for his own good or that of the firm. 14 The Commissar's principal interest lays outside the firm. It is not political appointment that distinguishes the commissar from the engineer. What does differentiate them is the motive ... and the attitude of the employee. For the commissar, days spent in a stateowned company make up a season in a political career. The commissar may well judge that satisfactory performance by the state firm will enhance his career or the position of his party or sponsoring group, in which case he and the engineer will assume common qualities. When he receives no external directives, he will also tend to adopt the perspective of engineers in the firm. More often, however, the commissar's goal is to fill some function distinct from the purely operational.15 For the most part, Kelly-Escobar insists that corporate actors must be either engineers or commissars. Although it is not impossible, they are unlikely to choose between different types of "administrative rationality" as might befit their requirements at a particular point. Her characterizations offer, however, a relatively straightforward way of conceptualizing just how corporate actors might maximize their own managerial discretion and relative autonomy; that is, by sensitizing or desensitizing themselves to the public-policy objectives of political actors. They do this, quite simply, by alternating between the administrative rationality of the engineer and the commissar as circumstances dictate. As engineers, they would emphasize the primacy of the commercial 39

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objectives of the Crown corporation, an obvious way to maximize their own managerial discretion and relative autonomy. As commissars, however, they might be prepared to subordinate these objectives to the non-commercial, public-policy objectives of politicians, especially if they thought that their managerial discretion and relative autonomy were threatened by bureaucratic actors purporting to represent such objectives. Let us refer to this stratagem as the practice of "selective rationality." We introduce it not only as an explanator of the exchange-relationships that develop between corporate actors and political actors, but also to acknowledge the reality that Crown corporations have public-policy, as well as commercial, objectives and that Crown-corporation decision-making is not carried out in isolation from the overall governmental decision-making process. THE DYNAMICS OF THE GAME ANALOGY Locus of the Game: Primary Action Channels To analyze the dynamics of the Crown-corporation decision-making process, we must take into account more than the kinds of games being played and who is playing them. We must also know, for example, where the games are being played. Graham Allison, in Essence of Decision, pays less attention to the identities, decision perspectives, and self-interest of specific types of players than he does to the "name of the game." This is a question of "who's got the action?", as the various stands, influences, and moves are combined to yield government actions and decisions. The core dynamics of the Allison game-analogy are expressed in terms of the "action channel," defined by Allison as a "regularized means of taking governmental action on a specific kind of governmental issue." 16 For example, explains Allison, the budgetary action channel is a "series of steps between the Budget Bureau's annual call for estimates, through departmental, Presidential, and congressional review, to congressional appropriation, Presidential signature, Bureau of Budget apportionment, agency obligation, and, ultimately, expenditure."17 Hartle, in some of his earlier writings (upon which the more generalized Hartle and Trebilcock model is based), asks the student of public policy to think of the expenditure budgetary process in terms akin to an "action channel." Noting that the expenditure budget can be seen as a "temporary resolution of the competition" among various players and games, he asks us to think of the decisions involved in the budget as the results of an "annual play-off series." He says that 40

A Positive Perspective it is not the terminology that is important, but rather the gaining of "some understanding of what goes on."18 Our "action channel" is the Crown-corporation financial-management decision-making process, a channel (or set of channels) that includes strategic planning and performance-evaluation processes, as well as strictly financial-management processes (expenditure, revenue, borrowing, and investment). This focus, while obviously a subset of the overall, governmental decision-making process, is broader than the expenditure budgetary process, strictly defined. It provides somewhat greater latitude to examine the "political economy" of the Crowncorporation decision-making process; to investigate "who gets what, when, and how" within the process. Because the Crown-corporation financial-management action channel is one from which no player can remain aloof, it is the most pertinent locus from which to investigate the dynamics of the government/Crown-corporation decision-making relationship. Levels of the Game: Substance of Decision Besides knowing where decisions are being made, we must also be able to take into account the kind of decisions, that is, the substance of decision. This subject is addressed in a game-analogy developed by Lawrence E. Lynn Jr, in which he depicts gamesmanship in the governmental decision-making process as occurring at different "levels" of the political system. The effective player, in the Lynn analogy, is one who "(1) knows the difference between the games that must be played and the games that may be played ..., (2) is able to identify the levels of play at which he has a relative advantage ..., and (3) allocates effort among games so as to maximize overall achievement."19 Lynn's three levels of gamesmanship—"high", "middle," and "low" —are based on a differentiation between "direction, means, and design" in the choice and implementation of government programs. In this analogy, the "high" game involves "deciding on whether there is a role for the government." It focuses on deciding "the right thing to do" and on identifying the "social values (that) are explicitly at stake." The "middle" game, says Lynn, involves "deciding more concretely what the (government's) role will be," a level of gamesmanship in which "the debate is about results"; that is, about the effectiveness and efficiency of government actions and decisions. According to Lynn, the "low" game "formulates the precise design" of the execution of the government's role. This level of gamesmanship, because it 41

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focuses on the "fine resolution, small-motor processes of the government," reflects the concerns of "those with operating responsibilities" and involves decisions that are "usually highly technical and arcane to non-specialists."20 Lynn's game analogy invites us to ask if there is a "high" game within the Crown-corporation decision-making process involving "strategic" decisions about the role and direction of Crown corporations; a "low" game involving "operational" decisions about the precise execution of that role; and/or, a "middle" game involving a mixture of strategic and operational decisions. His analogy, however, provides us with no firm behaviourial criteria with which to differentiate between different levels of play. Moreover, to think that substance of decision might be approached in terms of such criteria is to assume that the discretion available to different kinds of principal actors is a quantity which is pre-ordained and static. Not a quantity which might vary, for example, with the degree of autonomy designed into a particular decision system. Therefore, a different way of taking into account the substance of decision making within the Crown-corporation decision-making process must be devised. It must be able to take into account the effects of variable levels of organizational autonomy on the decision perspectives and maximizing behaviours of different kinds of Crowncorporation decision makers. I simply posit that any government, by way of organizing itself to provide direction to its Crown corporations, keeps to itself a "short-list" of "strategic" decisions it prefers to locate within the central institutional framework of the government, delegating all other (presumably "operational") decisions to the boards of directors and managements of the individual Crown corporations. The length of such "short-lists," it might be imagined, will vary widely within the full range of organization design options theoretically available when structuring the government/Crown-corporation decisionmaking relationship. Information, Information Processing and Gamesmanship The Galbraith information-processing model of organization design, as noted earlier, posits selfless and invisible decision makers functioning within the purely normative confines of the concept of organizational efficiency. This model cannot take into account the positive dimensions of information processing and information exchange; that is, how different kinds of principal actors might use (or misuse) information in order to achieve decision outcomes most favourable to themselves. Most applications of the game analogy, on the other hand, 42

A Positive Perspective emphasize the strategic dimensions of the quantity and quality of information available to the various players. Hartle, who considers information to be the "currency" of the senior bureaucracy, argues that "influence is not possible" unless the player has access to both the sources of information and the attention of decision makers who base their decisions, at least in part, on that information.21 "Knowledge is power," say Hartle and Trebilcock, and "ignorance is impotence," meaning that "inside information" is usually exchanged (or traded) but never given away.22 Breton and Wintrobe, proceeding from a similar set of assumptions, have developed a game analogy in which the concept of bureaucratic efficiency is examined in terms of the decision perspective of bureaucratic actors, actors whose prime objective is to manipulate information and efficiency levels in order to maximize their own power and influence.23 "Information processing," strictly speaking, does not take place within the Breton and Wintrobe model. Rather, what occurs is the "systematic distortion of information," a deliberate strategy employed by power-maximizing bureaucrats to control efficiency levels within an organization. The wider the range of efficiency over which the organization can be made to operate at the discretion of the bureaucrat, they argue, and the greater control the bureaucrat has over that range, the greater his power will be. To implement "selective efficiency" through the systematic distortion of information, however, requires the systematic collaboration of others within the organization. For this reason, say Breton and Wintrobe, bureaucrats indulge in a simultaneous "investment" game to accumulate "capital." They fashion "trust" networks throughout the organization which facilitate the exchange of information by establishing "lines of credit", allowing them to consolidate their own information advantage.24 Breton and Wintrobe's game analogy, however insightful, cannot be used to explain information, information processing, and gamesmanship within the Crown-corporation decision-making process because it cannot take into account variations in the degree of autonomy of information processing that might be designed into different components of the government decision-making process. The Crowncorporation decision-making process is a case in point. In this subset of the government decision-making process, the bureaucratic actors' information advantage is likely to be challenged by another set of actors. Corporate actors, whose decision perspective disinclines them to trade information with bureaucrats, may prefer to establish direct exchange-relationships with politicians. The point of this conjecture is to draw attention to the idea that the rules of the game might not be the same for the Crown-corporation decision-making process as they 43

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are for the overall governmental decision-making process. Moreover, the "rules of the game" for the Crown-corporation decision-making process might differ with variations in the degree of autonomy designed into the government/Crown-corporation decision-making relationship. The Rules of the Game: Organization Design Allison, explaining how players' stands, influences, and moves combine to yield government actions and decisions, argues that the rules of the game are as important as the action channel in gaining an understanding of the governmental decision-making process. The reason for this, according to Allison, is that the rules of the game "establish the positions, the paths by which men gain access to positions, the power of each position, (and) the action channels."25 Hartle, in his game analogy of the expenditure budgetary process, argues that the rules of the game not only "constitute the incentive system under which (the players) operate," but also determine the "basis on which players are selected and ... admitted to the particular game."26 The concept of an incentive system assumes the presence of "rewards" for "appropriate" behaviour and "punishments" for "inappropriate" behaviour, regardless of whether the rules are formal or informal, explicit or implicit. Thus, in the Hartle and Trebilcock game analogy, "promotion (increasing policy influence) within the system" serves as the formal reward for appropriate behaviour, while "nonpromotion" (demotion, dismissal being rare) serves as the formal punishment for inappropriate behaviour. Of particular importance, say Hartle and Trebilcock, are the informal rules and incentives, which govern such things as admittance to insider information networks, presumably of the variety discussed by Breton and Wintrobe. Disloyalty to such an informal incentive system is "exclusion ..., with devastating results for the offender's subsequent performance." Moreover, they say, informal rules and incentives serve to reinforce formal rules and incentives. Because both types of rules and incentives are part of the overall decision system, playing the game "ultimately means defending the system as a whole when threatened."27 In Allison's game analogy, the rules of the game act primarily to "sanction moves of some kinds"—bargaining, the making of coalitions, the use of persuasion, bluffs, and threats—while making other moves "illegal, immoral, ungentlemanly, or inappropriate."28 They regulate, in other words, much of the interaction that takes place within the action channel. Hartle, writing in a similar vein, has noted that 44

A Positive Perspective the rules of the game "contain conflict" among players and, hence, "maintain the legitimacy of the system." They also "legitimize decisions which are inherently arbitrary." The rules of the game, in other words, ensure that different kinds of principal actors have "their day in court," as well as the opportunity to "exercise their bargaining power in a legitimate fashion."29 Because there is "due process," say Hartle and Trebilcock, losers "acquiesce in their losses to the extent of refraining from violence or other illegal acts"; that is, from "behaviour that is not acceptable under prevailing rules."30 Hartle, who is fond of using a courtroom analogy to describe interactions within the resource-allocation process, characterizes it as a "rolling compromise between factions in an essentially adversarial process under rules, formal and informal, that restrict the field of battle." Protagonists, in this battle, are "expert witnesses," while policy and program evaluations constitute the "evidence" that is used by either the prosecution or defence to bolster their "case."31 The centrality of the rules of the game, says Hartle, is such that "lawyers, because they are trained in the virtues and practices of the adversarial process, are often superior advisors. They may not know very much about the subject matter, but they rarely get confused about the nature of the game. Economists, on the other hand, often know more than anyone wants to know about the subject matter, but they forget, if they ever understood, the basis of the games being played."32 Allison, Hartle and Trebilcock, as well as others, devote considerable attention to the rules of the game—as incentives systems, and as a means of regulating behaviour within the government decisionmaking process. But they are terse about the concrete sources of these game rules. Allison, for example, assumes that the rules of the game "stem from the Constitution, from statutes, from court interpretations, executive rules, conventions and even cultures."33 Hartle and Trebilcock note that "each government decision is a manifestation of the (statutory) authority vested in the incumbent of an office." But they dwell less on the formalities of the "rule of law" than they do on the idea that the rules of the game (informal rules, by definition) emerge from the practice of the game. "Suprarules," they say, emerge from the "interplay" of the players and serve both to constrain the conflict and legitimize the outcomes.34 No proponent of the game analogy has speculated that the design of an organization might be the carrier, much less the source, of the rules of the game. Galbraith, conversely, has developed a model of organization design. But he considers "reward systems" (and due process) to be extrinsic to his model. They are, he says, "alternatives 45

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to changing organization modes and strategies (that are undertaken) in order to change behaviour and performance."35 I think that organization design—more broadly defined to take into account the incentives, self-interest, and maximizing behaviours of different kinds of principal actors—can be viewed as a positive explanator of the rules of the game, of the interactions that take place within the decisionmaking process and, thus, to a certain extent, of the outcomes of the process. Therefore, we use Galbraith's information-processing and organization design strategies as conceptual starting points from which to derive rules of the game for alternative Crown-corporation organization designs theoretically available to structure the government/ Crown-corporation relationship. We do this, quite simply, by activating the game analogy to fashion positive approximations of the normative models of organization design articulated by Galbraith. These Crowncorporation organization designs, discussed below as the rules of the game for each design, predict different outcomes in terms of the balancing of corporate autonomy and institutional control, taking into account the incentives, self-interest, and maximizing behaviours of different kinds of Crown-corporation decision makers. Self-containment rules. It might be imagined that the rules of the game in a Crown-corporation organization design based on Galbraith's creation of self-contained units would mandate autonomy of information processing and decision making by individual Crown corporations. This design strategy, as noted earlier, is one in which the individual units handle their own category of production (activity) and have most of the resources they require. A Crown-corporation organization design based on this strategy is not neutral on the issue of balancing corporate autonomy and institutional control. Rather, it emphasizes flexibility of decision making by Crown corporations and the exercise of corporate autonomy. This Crown-corporation organization design requires only minimal sharing of information by Crown corporations with the central institutional framework of the government. As such, it could tend to inhibit the effective monitoring of Crown-corporation performance by the government and the exercise of institutional control. If the rules of the game in this Crown-corporation organization design predict more of an information advantage for one kind of principal actor than for others, the advantage would belong to those directly responsible for the management of individual Crown corporations: corporate actors. Corporate actors, in a self-contained units Crown-corporation organization design, have considerable managerial discretion within the Crown-corporation financial-management action channel and relative 46

A Positive Perspective autonomy from the governmental decision-making process. Because the "short-list" of decisions the government prefers to hold to itself is the shortest of all design options, it falls within the discretion of corporate actors to participate in strategic, as well as operational, decisions. Their choice depends, naturally, on which level of decision making is most advantageous for them. Corporate actors can, for instance, use their information advantage to facilitate the practice of selective rationality, adopting the headgear of the corporate commissar to preclude or forestall the influence of bureaucratic actors. The shorter the "short-list," however, the more corporate actors can think and act as corporate engineers. Indeed, their incentive to practise selective rationality decreases in proportion to the managerial discretion and relative autonomy assured them by virtue of a shorter list. A self-contained units Crown-corporation design is most advantageous to the corporate actors' maximization of their own managerial discretion and relative autonomy. It is least advantageous to the bureaucratic actors' maximization of their own policy influence, because it denies them an additional area of governmental activity and decision making within which to maximize their own power and influence. This type of Crown-corporation organization design is acceptable to political actors as long as it permits the practice of selective responsibility; that is, they must be able to claim credit for the activities of Crown corporations when the political returns are positive, and yet able to establish some distance from the instrument when the political returns are zero or negative. Vertical information systems rules. To extend the analogy, the rules of the game in a Crown-corporation organization design, based on Galbraith's investment in vertical information systems, explicitly mandate control of Crown-corporation information processing and decision making by the central institutional framework of the government. This design strategy, as noted earlier, uses vertical communication channels to bring information up to a central decision point; it then redirects the information to appropriate places in the hierarchy for task execution. Like a Crown-corporation organization design based on the creation of self-contained units, this strategy is not neutral on the issue of balancing corporate autonomy and institutional control. Rather, it emphasizes the effective monitoring of Crown corporation performance by the government and the exercise of institutional control. Investment in vertical information systems requires the presence of a strong central decision point with which to exploit global information. As such, it might tend to inhibit flexibility of decision making by Crown corporations and the exercise of corporate autonomy. If the 47

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rules of the game in this Crown-corporation organization design predict more of an information advantage for one kind of principal actor than for others, that advantage would belong to the custodians of the vertical information system —presumably, a combination of political and bureaucratic actors. Corporate actors, in a vertical-information-systems Crown-corporation organization design, do not have much managerial discretion within the Crown-corporation financial-management action channel or relative autonomy from the governmental decision-making process. Because the "short-list" of decisions the government prefers to hold to itself is the longest (of all design options), it is not within the discretion of this category of principal actor to participate extensively in strategic decision making. That is the domain of those responsible for running the vertical information system. Corporate actors, to the extent that they are displaced from strategic decision making, are relegated, for the most part, to operational decision making and the headgear of the corporate engineer. The longer the short-list, however, the less corporate actors can think and act as corporate engineers, even if that is their preference. Their incentive to behave as corporate commissars and to practise selective rationality increases in proportion to the managerial discretion and relative autonomy denied them by a longer list. A vertical-information-systems Crown-corporation organization design is least advantageous to the corporate actors' maximization of their own managerial discretion and relative autonomy. It is most advantageous to the bureaucratic actors' maximization of their own policy influence, given that the design affords them an additional area of government activity and decision making within which to operate. This type of Crown-corporation organization design, although it implies the contrary, is acceptable to political actors so long as it permits the practice of selective responsibility. But they must be satisfied that central-bureaucratic-monitoring agents are better equipped than corporate actors to provide them with the information they need to use Crown corporations as instruments of vote maximization. Lateral relations rules. The rules of the game in Crown-corporation organization design, based on Galbraith's creation of lateral relations, mandate shared information and joint decision-making within the government/Crown-corporation relationship. This is encouraged by using lateral information-processing devices (such as integrating roles) rather than directing all information to a central decision point, on the one hand, or sharing it only minimally, on the other. As such, this Crown-corporation organization design is not neutral on the issue of 48

A Positive Perspective information sharing by government and Crown corporations. It is neutral, however, with regard to balancing corporate autonomy and institutional control. Indeed, to emphasize flexibility of decision making by Crown corporations at the expense of effective monitoring of Crown-corporation performance by the government (or vice versa) would be to undermine the joint character of information processing and decision making. If the rules of the game in the lateral relations Crown-corporation organization design pose more of an information advantage for one kind of principal actor than for others, this advantage would belong to those occupying integrating or liaison roles. This group might conceivably include any combination of political, bureaucratic, or corporate actors. Because the use of lateral information-processing devices (such as integrating roles) is directed toward the stimulation of information sharing and joint decision making, neither corporate nor bureaucratic actors have a clear-cut information advantage. Both sets of actors have sufficient discretion to participate in strategic decision making within the Crown-corporation financial-management action channel, but neither are able to dominate it. The action channel is dominated by the "integrators", whose specific identity is determined by political actors. Selective rationality, rather than being merely a stratagem available to corporate actors to preclude or forestall the influence of bureaucratic actors, is a rule of the game because the sharing of a joint decision perspective with others requires sensitivity to the public policy objectives of political actors. A lateral relations Crown-corporation organization design is no more or less advantageous to the maximization by corporate actors of their own managerial discretion and relative autonomy than it is to the maximization by bureaucratic actors of their own policy influence. It carries with it, however, something of an information advantage for political actors who equate the likelihood of vote maximization with their own involvement in the Crown-corporation decision-making process. Political actors, to the extent that they occupy integrating roles within this design, are substantively, rather than selectively, responsible for the Crown-corporation instrument. This obviously reduces their capacity to practise selective responsibility, but it affords them a more active role in the utilization of Crown corporations as instruments of vote maximization. TESTING THE GAME ANALOGY I recognize, of course, that the ways in which governments actually structure their decision-making relationship with Crown corporations 49

tttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttt might not perfectly correspond to the above Crown-corporation organization designs. They are, after all, merely hypothetical. We therefore limit ourselves to investigating the possibility that the informationprocessing and decision-making practices linking Crown corporations to governments in selected Canadian jurisdictions more closely approximate one Crown-corporation organization design than another. Specifically, we will investigate the possibility that the self-contained, Crown-corporation organization design has an empirical referent in Alberta practice; investment in vertical information systems in Manitoba practice; and the creation of lateral relations in Saskatchewan practice. By investigating actual information-processing and decisionmaking practices, we will be able to focus on the behaviourial dimensions of the internal, political economy of public-policy decision making in and around Crown corporations. This focus differs quite markedly from more traditional and familiar avenues of empirical observation, such as calculating the magnitude of Crown-corporation holdings or describing the official dimensions of so-called Crowncorporation accountability-control regimes. I am convinced, on the one hand, that provincial Crown-corporation organization designs did not emerge randomly and are, indeed, creatures of their own particular context: political, economic, and historical. On the other hand, as noted earlier, our disciplinary focus is public-policy decision making; not political science, economics, or history. I simply seek to test the analogy. Of course, this goal does not liberate me from the task of constructing a sound contextual analysis. Nor does it free me from developing a basic definition of the term "Crown corporation," if for no other reason than to ensure that entities thus characterized do not differ markedly in terms of their formal and functional characteristics, both within and between jurisdictions. The criteria I employ to characterize Crown corporations have been formulated to permit the description of more or less homogeneous "corporate enterprise groups" within each jurisdiction. In formal terms, such entities must be organized and run as corporations, not government departments. That is, they must be distinct legal entities, with the principal legal attributes of a corporate form of organization. In terms of ownership, the entities must be at least 50 per cent owned by the government. Apropos terms of control, some (but not necessarily all) members of these corporations' boards of directors are entitled to be appointed by the government. I want to focus clearly on that component of the Crown-corporation universe that is unambiguously subject to whatever generalized Crown-corporation accountability and control-regimes 50

A Positive Perspective governments might be inclined to apply to their corporate holdings (omitting, however, the so-called mixed enterprises).36 In functional terms, we will focus on commercial Crown corporations, which not only pursue profits as part of their mandate, but also compete with private-sector companies in marketing their outputs.37 I will exclude from my definition so-called natural monopolies, which are not subject to competitive pressures when marketing their outputs (for example, public utilities), as well as companies in which the pursuit of net revenues is not part of the firms' mandate. Note that lists of all Crown corporations within each province at the time of the investigation have been included, for information purposes, in appendices 1, 2, and 3. Note, too, that the functional criteria within my definition have been included only to emphasize the commercial nature of my target group. They are not meant to overshadow the fact that such corporations have important public-policy as well as commercial objectives. In summary, I have not included within the corporate enterprise group any corporations that do not fulfil the following criteria: that they • • • •

be at least 50 per cent owned by the government; be incorporated under acts of legislation or company acts; be normally separate from the government as employers; have boards of directors, some (if not all) of whose members are entitled to be appointed by the government; • emphasize the pursuit of profits as part of their mandate; and • compete with private-sector companies in marketing their outputs. The selection of Alberta, Manitoba, and Saskatchewan as jurisdictions in which to test my Crown-corporation organization designs stems from several rather straightforward considerations. First, all these governments share an identical constitutional design: the Cabinet/parliamentary form of government. Second, these three provinces are jurisdictions of roughly comparable size, and—most importantly—have governmental administrative infrastructures and Crowncorporation sectors that do not differ substantially in terms of magnitude or scale. 38 Despite these similarities, the governments of Alberta, Manitoba, and Saskatchewan have developed very different kinds of organizational arrangements with which to structure the government Crown-corporation decision-making relationship. At no time, were these differences more apparent than during the period investigated by the present study—from the early 1970s to the mid-1980s — a period often considered as the peak of the proliferation of Crown 51

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corporations in Canada.39 During this period, Saskatchewan used a holding company (itself a Crown corporation) to coordinate interdependencies between the government and its Crown corporations. During that same period, Manitoba used a department of government to perform a similar function, while Alberta, in contrast, developed no explicit administrative devices with which to institutionalize formally the government/Crown-corporation decision-making relationship. In the Alberta, Manitoba and Saskatchewan case studies, I set out to demonstrate how these organizational arrangements, in practice, more closely approximated one particular Crown-corporation organization design than another. I also try to demonstrate how these Crowncorporation organization designs acted to constrain the maximizing behaviours of different kinds of principal actors, thereby yielding different outcomes in terms of the balancing of corporate autonomy and institutional control. I have done so within a particular historical context, developing each provincial case as a unique "history capsule." Naturally, my primary focus is on the actual dynamics of Crowncorporation decision-making in each province and how these practices evolved. We will examine the origins and consequences of these Crown-corporation organization designs more closely in chapter 6.

52

Chapter Three Alberta: The Self-contained Design

INTRODUCTION Any analysis of information-processing and decision-making practices linking Crown corporations in Alberta to the Alberta government is complicated by the contradictions of an administrative environment characterized by an incipient "hostility toward public ownership."1 Not unexpected in "a community where property rights and a hatred of socialism are virtually a secular religion,"2 this sentiment helps explain why successive Alberta governments were reticent to claim credit for the creation or proliferation of Crown corporations. Such reticence, however, did not preclude the formation of a Crown-corporation sector comparable in magnitude to that in Manitoba or Saskatchewan. Many of these companies were formed during the Social Credit years (193571); as was the government-owned banking industry known as the Alberta Treasury Branch system, which Alberta politicians always swore was not a Crown corporation. But it was the Lougheed era (1971-85), with its distinct activist focus on the strengthening and diversification of Alberta's resource-based provincial economy, which witnessed the establishment of the bulk of Alberta's Crown-corporation sector. This genre of activism was described by Lougheed's political biographer as follows: State capitalism. A kind of hybrid, descended from Karl Marx and Adam Smith, in which the government neither owns the means of production—which the pure socialists favour—nor leaves them altogether alone, which the free enterprisers favour. What it does is to use the power of tax, licence, law, and royalty, to raise its own capital, then intervenes as a participant in the

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private sector of the economy, making itself a partner of one company, competitor of another, owner of yet another. It does all this with a view to forcing changes in the economic structure.3 New Crown corporations that came into being during this period resulted from a mixture of programmatic and developmental initiatives, some of which were less conventional in their interface with the private corporate sector than others. Among the less conventional and most noteworthy of the Lougheed initiatives—less conventional in the sense that they were clearly able to displace corporate activity within the private corporate sector—was the creation of the Alberta Energy Company (AEC) and the acquisition of Pacific Western Airlines (PWA). This genre of intervention did not typify the bulk of government enterprise in Alberta. But it did exemplify a hybrid, public/private-sector approach to government enterprise unique to Alberta, one which harkened back to the establishment of the Alberta Gas Trunk Line (now the Nova Corporation) during the E.G. Manning Social Credit administration.4 "Alberta," note Richards and Pratt, "has eschewed public ownership and the creation of Crown corporations as a mode of intervention, preferring to intervene through its unique quasi-state enterprises," a term they use to describe the Alberta Energy Company.5 Rather than characterize the Alberta Energy Company and Pacific Western Airlines as "quasi-state enterprises" (a term not explained by Richards and Pratt), we must seek to improve our understanding of the decision-making relationship forged by the Alberta government between itself and these unconventional vehicles of government enterprise. To facilitate analysis, we will refer to these two corporations as the Alberta government "corporate enterprise group." The Alberta Energy Company, formed by an Act of the Alberta legislature in May 1974, was established by "policy design" as an "investment vehicle for ordinary citizens in the development and utilization of public resources owned by those citizens" (witness the Primrose gas fields, Alberta's participation in Syncrude) and as an "instrument of economic growth and development in the province."6 Although the Act stated that "the company is not an agent of the Crown in the right of Alberta," the minister of natural resources was charged with responsibility for the administration of that part of the Act dealing with the provincial government's participation in the company. This participation comprised the appointment of no fewer than four members of the (ten-member) board of directors of the company and the initiation for decision by Cabinet of regulations "respecting any manner or thing necessary or advisable for carrying out the intent and purposes of the Act."7 The salient feature of the legislation, from 54

Alberta: The Self-contained Design the standpoint of judging whether the corporation was a Crown corporation or a mixed enterprise, was the initial ownership agreement, in which the government was to hold 50 per cent of the issued voting shares of the corporation. No more, no less. A maximum shareholdings limit was contained in the Act and applied a 1-per-cent ceiling to all shareholders other than the Alberta government, thus ensuring the province as the sole significant owner/shareholder. Because, in later years, the government's ownership was allowed (with appropriate legislative amendments) to fall on two separate occasions—to 45 per cent in 1982, to 37 per cent in 1985—by virtue of the government not exercising its option to participate in new share issues, there is little doubt that AEC became a mixed enterprise, not a Crown corporation. The August 1974 addition of Pacific Western Airlines to the Alberta government's corporate enterprise group resulted from a bold corporate takeover, not any act of the Alberta legislature. It was acquired, according to Premier Lougheed, to protect Alberta's position as the "gateway to the North."8 If there was a policy design to this acquisition, it was a "defensive response," in the sense that "public ownership was essential if PWA was not to fall into the hands of interests who were indifferent or even hostile to Alberta's economic aspirations."9 The ownership arrangement, in which the government of Alberta was to hold 99.7 per cent of the voting shares of PWA, meant that the government was the sole proprietor of the airline. But the mechanisms the government chose to have at its disposal to control the activities of its new acquisition lacked statutory definition and were surprisingly minimal. They consisted merely of the appointment of three additional members to the board of directors of the company, and the designation of a cabinet minister—the minister of transportation—to serve as a liaison between the Cabinet and the chairman of the PWA board. Ironically, it was the divestiture of the company (November 1983) that resulted in a statutory framework for the company. The stated purpose of this latter piece of legislation was to "ensure that the control of the airline is broadly based and that no person or group of persons obtain more than 4 per cent of the shares of Pacific Western Airlines" upon its divestiture. I0 An additional irony, because the Alberta government had always hotly denied that PWA was a Crown corporation, was that the minister introducing the Act stated "my understanding is that it's (PWA is) considered to be a Crown corporation for tax purposes in any case."" It could be argued, of course, that the ways in which the Alberta government linked itself to its corporate enterprise group were more characteristic of the mixed-enterprise mode of government enterprise than the Crown-corporation instrument. The Alberta Energy Company 55

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was considered a mixed enterprise by some commentators, a Crown corporation by others.12 But Pacific Western Airlines, because it was more than 99 per cent owned by the Alberta government, cannot be considered a robust example of the mixed-enterprise mode. In any case, my application of the term "Crown corporation" to these firms refers to that period of time in which the Alberta Energy Company was 50 per cent, and Pacific Western Airlines more than 99 per cent, owned by the Alberta government. The question of what is, or is not, a Crown corporation in Alberta is clearly not straightforward; that is, not according to an Alberta government memorandum in which the characteristics common to Crown corporations were the subject of an Executive Council review. This memorandum stated: "Concerning the designation of a Crown corporation ... there appears to be no consistent rationale or pattern for such designations in Alberta."13 The term "Crown corporation," in fact, was used in neither the Alberta Financial Administration Act or the Auditor General's Act, two statutes with general applicability to all Alberta government departments and agencies. Nor did it appear in the enabling statutes of most government agencies generally regarded as Crown corporations. Indeed, it was only rarely mentioned in the annual reports or official communications of Alberta Crown corporations. In fact, in the list of Alberta Crown corporations compiled by Laux and Molot for a 1984 consulting study, the term "Crown corporation" was outnumbered more than three-to-one by such nomenclature as "commission," "authority," "council," "foundation," "board," "institute," and so on. 14 Furthermore, although Alberta had no single statute dealing exclusively with Crown corporations, its Financial Administration Act did differentiate between "provincial corporations" and "provincial committees." The former were defined as incorporated entities whose issued voting shares were owned by the Crown. The latter included a handful of government agencies that not only did not meet either of these criteria, but also were not considered departments of the government (the Alberta Liquor Board, for example). These differentiations, of course, fell short of any formal classification system for Crown corporations. Nor was there any scheduling device with which to distinguish among the different categories of government enterprise. The substitution for such devices, as noted by Laux and Molot, were the distinctions in practice, which originated within the provincial Treasury and applied to Crown corporations according to "size and function, whether the corporation is commercial or non-profit, i.e. delivering services or implementing government programs."15 The provincial treasury, which adopted such rules of thumb on an asneeded basis, was responsible for the annual review of the budgetary 56

Alberta: The Self-contained Design and financial requirements of all Alberta Crown corporations, with the exception of those deemed to have budgetary independence; namely, the Alberta Liquor Board and Alberta Government Telephones (and, of course, the corporate enterprise group). Submission of corporate strategic plans, moreover, was not a requirement of the annual budget-review process. Nevertheless, all Alberta Crown corporations (again, with the above exceptions) were required to submit capital budgets to Treasury and some—those which had deficits or required funding—were required to submit operating budgets. Another Treasury rule-of-thumb governing the handling of major Crown-corporation investment proposals provides the key to the definition of a second analytical grouping of Alberta Crown corporations. We will refer to this group as Alberta's "conventional crown corporation sector." Certain Crown corporations with sizable annual capital budgets —the Agricultural Development Corporation, the Alberta Mortgage and Housing Corporation, the Alberta Opportunity Company—were referred to by Treasury staff as "policy Crowns." Because provincial Treasury considered their investment proposals to have strategic financial implications for the province, these companies' capital budgets were singled out for annual Cabinet-level approval after intensive analysis by the Financial Planning and Analysis Division of the provincial Treasury. Investment proposals brought forward by other Crown corporations, including Crown corporations that normally had budgetary independence from Treasury, were singled out for similar treatment on an ad hoc basis if Cabinet or the provincial Treasurer considered a strategic financial issue to be at stake. Take, for example, Alberta Government Telephone's 1985 proposal to extend individual line service to rural subscribers. Because all Alberta Crown corporations with investment proposals deemed to have strategic financial implications were treated in the same fashion, it is useful to refer to such corporations as falling within the conventional Crown-corporation sector. Crown corporations within the corporate enterprise group, on the other hand, were financially self-sustaining and made their own investment decisions. With the exception of a few case studies and the odd biographical note, there has been very little systematic study of Crown corporations in Alberta—whether they be classified within the conventional Crowncorporation sector or within the corporate enterprise group. A comparison of the Alberta government's structuring of its decision-making relationship with these two groups of corporate instruments should provide us with a reasonable context for our investigation and analysis. We begin by examining how the government of Alberta organized itself to provide direction to these two groups of Crown corporations; 57

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where the decisions were made; and what kinds of decisions these were.

ORGANIZATION AND DIRECTION At the apex of the Alberta Crown-corporation decision-making process, according to Laux and Molot, was the provincial Cabinet, a locus of decision that constituted a "major forum" 16 for the making of collective ministerial decisions on Crown-corporation issues. Because there was no Cabinet committee dedicated exclusively to the deliberation of Crown-corporation issues and decisions, however, the application of conventions of collective ministerial responsibility to Crown corporations was not performed in any explicit fashion. Successive Alberta governments, in fact, eschewed the creation of any formal or elaborate Cabinet-committee structure; they purported to emphasize more strongly the individual rather than the collective ministerial responsibility, for Crown corporations as well as conventional departmental bureaucracies. Several observers of policy structures and processes at the provincial government level have noted the existence of an Alberta Cabinetcommittee system consisting of coordinating and policy committees.17 As well, Alberta observers have pointed out an apparent division of labour within the Alberta Cabinet: a Priorities Committee, that reviewed Crown-corporation capital budgets and dealt with high-priority issues; a Treasury Board, that concentrated on routine financial management issues and decisions; and, an Investment Committee, that superintended Alberta Heritage Fund investment decisions. This ministerial division of labour was apparent largely because the membership of these committees was virtually identical. Depending on the nature of the issue prompting Cabinet-level deliberation, the core group of ministers making up these committees (the premier and a handful of senior ministers including the provincial treasurer) would adopt various modes of collective decision making (often during the same committee meeting). These interchangeable Cabinet-level decision forums —a Cabinet-committee structure that Alberta politicians insist did not reduce to an "inner Cabinet"—constituted the central locus of decision within the Alberta Crown corporation decision-making process. The characteristic locus of decision, however, was contained within the linkage between the individual minister responsible for the Crown corporation in question and the board of directors of that corporation. In the conventional Crown-corporation sector, where all board members were government appointees, ministers were linked to corporate boards in a number of ways: frequently as a board member; sometimes 58

Alberta: The Self-contained Design

ALBERTA Conventional Crown-Corporation Sector ORGANIZATIONAL OVERVIEW legislature minuister

cabinett prpvinciall treasuryy

corporatee board

corporate management

CONTROL INSTRUMENTS

Short-list decisions - Formation - Mandates - Major investments Monitoring agents - Ad hoc Cabinet-level - Provincial Treasury Information base - Capital budget submissions - Interim submissions Evaluative mode - Case-by-case - Prospective

Figure 1 Overview: Conventional Crown-Corporation Sector

(but rarely) as chairman of the board; and most often as the designated liaison with the chairman of the board. In the corporate enterprise group, where ministers did not serve as board chairmen, where government appointees comprised only a minority of board members, and where board chairmen were not government appointees, the only linkage between these corporations and the government was that liaison between the designated minister and the chairman of the board. Civil servants, most often of the departmental variety, occasionally served as members of boards of directors within the conventional Crown-corporation sector. They did not, however, serve on the boards of directors of the corporate enterprise group outfits. The latter were composed almost exclusively of Alberta businessmen. The practice of having Crown-corporation management serve on corporate boards followed no coherent pattern within either the conventional Crowncorporation sector or the corporate enterprise group; indeed, it defied 59

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generalization. If any one significant generalization could be made about the boards of directors of Alberta Crown corporations, it would be that their importance as primary-decision forums within the Alberta Crown corporation decision-making process cannot be overestimated. Finally, because there were no intermediate structures or oversight mechanisms that had any specific mandate to deal with issues or decisions not resolved within the boards of directors of individual Crown corporations, any outstanding items automatically became candidates for Cabinet-level resolution. Aside from Cabinet, Cabinet committees, and the boards of directors of individual Crown corporations, no locus of decision—with the possible exception of the provincial Treasury—was institutionally mandated to impart explicit direction to Alberta Crown corporations. Alberta politicians, generally speaking, actively discouraged the perception that any powerful central-agency structures that supported Cabinet-level decision forums might be growing and developing in Alberta. The provincial Treasury, a staff resource that would be depicted as a central agency within most other Canadian jurisdictions, was usually described by Alberta politicians as the agency of the provincial Treasurer, not as a central agency serving Cabinet or any particular Cabinet committee. Central agencies promote "risk aversion," said one former Lougheed Cabinet minister; "we have always resisted them being put into place." Having central agencies perform any explicit overseer's role with respect to Crown-corporation issues, added this former minister, would be "unthinkable." In fact, he noted: "The last thing I would suggest for any government would be a topheavy central-agency structure, to put central agencies in a superintendency role over Crown corporations or any of the Crowns. What I would do, if I didn't like what they (Crown corporations) were doing, would be to harden up the policy directions they have to follow, or change the chairman or the directors of the board. It would be unthinkable to make them (Crown corporations) subservient to a central agency." A small Executive Council staff and senior Treasury officials provided staff support to Cabinet-level decision-forums on an as-needed basis. The Executive Council staff provided support in the area of executive recruitment for some Crown corporations; for example, while Treasury officials, as noted above, superintended the comptrollership of Crown-corporation budgetary and financial processes. Whether the Treasury role, in particular, represented an application of central-agency-type processes to Crown-corporation decision making is a question that cannot be clarified without specific reference to the 60

Alberta: The Self-contained Design

ALBERTA Corporate Enterprise Group

ORGANIZATIONAL OVERVIEW

legislatur minister

cabiner povinciakl treasury

coroporate boards

CONTROL INSTRUMENTS

Short-list decisions - Formation - Mandates Monitoring agents - Ad hoc Cabinet-level Information base - Informal Evaluative mode - Informal

corporate management

Figure 2 Overview: Corporate Enterprise Group

actual interactions taking place among the different kinds of Crowncorporation decision makers in or around individual corporate boards and Cabinet-level decision forums. Because of the proximity of Treasury officials to Cabinet-level decision-forums, however, it would be unwise to exclude Treasury from any definition of the central locus of decision. The Alberta government, generally speaking, sought to locate the centre of gravity of the Crown-corporation decision process within the boards of directors of individual Crown corporations, linking this decision forum to the centre by means of conventions of ministerial responsibility and the provincial Treasury's comptrollership of budgetary and financial processes. This generalization, however, is not eloquent concerning the actual substance of decision: the kinds of decisions the Alberta government preferred to hold to itself; and the 61

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kinds of decisions it preferred to delegate to individual Crowncorporation boards. It formulated, according to Tupper, a rudimentary model of managerial direction, purporting to locate "policy" decisions within the central institutional framework of the government and "administrative" decisions within individual corporate boards.18 This substantive distinction, one which the Alberta government sought to apply to all its Crown corporations, was based on the general idea that Crown-corporation activities "conform to the government's policy priorities" as decided by Cabinet and that the boards are responsible for "sound business management and corporate direction."19 Said one former Lougheed Cabinet minister: "You must have a good deal of faith in your appointed members of the board in carrying out the dayto-day decisions ... only long-term policy decisions are the subject of the minister in Cabinet." The influence of this rudimentary model of managerial direction was most evident in the Alberta government's approach to Crown corporations within the corporate enterprise group. Here, as Tupper points out in his case study of Pacific Western Airlines, the government sporadically communicated its "broad, long-term policies" to the PWA board. But beyond adhering to such general policy preferences, the board was expected only to "administer PWA as a normal commercial undertaking." 20 Similarly, in the case of the Alberta Energy Company, Premier Lougheed stated in a letter of agreement with the president of A EC that "it is the government's intention to participate in the ownership, not the management" of the company.21 This commitment was interpreted by ministers responsible for the corporation to mean "there would be a board of directors who would run it (AEC) and the government would not intrude or become involved in the day-to-day management of the company."22 By emphasizing their participation in the "ownership" but not the "management" of this group of Crown corporations, Alberta politicians enunciated an archetypical "arm'slength" relationship between the Alberta government and its corporate enterprise group. That relationship was described by a former Lougheed Cabinet minister as follows: Talk about arm's length! We owned 99 per cent of it (PWA) and people would get up and say, "The plane was late this morning and I'm damn mad; what are you going to do about it?" We'd say, "Talk to the management. We own this airline as an investment but we do not intend to have any involvement in the day-today operations of the company. If you don't like the colour of the planes, go see the manager. Buy some shares. Go to the annual 62

Alberta: The Self-contained Design meeting. You can talk to me about whether it's a good or bad investment—and we're quite happy to debate that—but as to the internal management, we're just not involved in that." This would really frustrate the Opposition but the public generally understood. It can be argued, as Tupper argues, that any structural differentiation of decision categories and responsibilities based on the venerable distinction between "policy" and "administration" is an "antiseptic" distinction that is "easily prescribed but rarely put into practice."23 To indulge in such sport, however, without thoroughly examining the normative appeal this distinction held for Alberta politicians is to risk overlooking what one former Lougheed Cabinet minister judged to be the "operative concept" of the Alberta government's view of its relationship with the corporate enterprise group. He termed this concept "structural autonomy," saying: These corporations are structured in such a way that the government sets them up, funds them, and sells part of them through the stock market to the public. The government then says: "OK, we're partners. You own the shares. These guys are running it. Don't bother us with your political comments because this is a business proposition." Structural autonomy is the way we want to do it; that is, (you) achieve the specific economic objective the corporation was set up to achieve, and the political objectives will flow from that. If you design something to run autonomously while achieving its objectives, that is a very efficient way to do it. Some students of government enterprise, including Laux and Molot, have expressed a certain bemusement with the propensity of the Alberta government "to make investments which will redound to the economic benefit of the province" and "to divest once a goal has been attained."24 For most Alberta politicians during the period investigated, however, the proposition that the public-policy objectives of government enterprise should flow from the achievement of their commercial objectives was a compelling proposition. It was applauded, at least by government members, whenever a privatization, or partial-privatization, of a Crown corporation was announced within the Alberta Legislature. Rather than pronounce upon the conceptual authoritativeness of Alberta's differentiation between "policy" and "administrative" decision categories and responsibilities, I simply wanted to know which types of decisions were being retained within the central institutional framework of the Alberta government, as opposed to being delegated 63

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to individual Crown corporations. A list of such decisions—in the case of Alberta it was a very short list—can provide us with a working definition of how the Alberta government organized itself to provide direction to its Crown corporations. Generally speaking, the Alberta government sought to locate decisions governing the formation (creation, acquisition, and divestment) and mandates of its Crown corporations within the central institutional framework of the government. All other decisions—with the exception of major Crown-corporation investment decisions thought to have strategic financial significance—the Alberta government sought to locate within individual corporate boards of directors. In the case of Crown corporations within the corporate enterprise group, this exception did not apply. This rudimentary differentiation between decision categories and responsibilities was very much a "make the rules as you go" approach to the organization and direction of Crown corporations. Nevertheless, it does provide us with a structural reference point with which to investigate the interactions and maximizing behaviours of different kinds of principal actors within the Alberta Crown-corporation decision-making process.

INSTITUTIONAL DECISION CONSTRAINTS The interactions and maximizing behaviours of Alberta's politicians, bureaucrats, and corporate actors were subject to institutional decision constraints that varied, not only from decision forum to decision forum, but also according to the kind of Crown corporation involved. That is, was it a member of the corporate enterprise group or the conventional Crown-corporation sector? Of the interactions taking place in and around the boards of directors of individual Crown corporations, those most frequently discussed were those occurring between the minister responsible for the corporation and the corporate board. Modes of ministerial interaction with the boards were largely determined by the composition of the board; the minister, for example, might be a board member, chairman of the board, or a designated liaison with the chairman of the board. All these modes of ministerial interaction were practised within the conventional Crown-corporation sector. But the most common mode—indeed, the only one practised in the case of the corporate enterprise group—was that known as the liaison mode. Such a working relationship between minister and board chairman, said a former Loughheed Cabinet minister, was direct and personalized; it assumed the dimensions of an alliance in which "the chairman of the board knows that the minister will tell him, well in advance, of any upcoming policies that may affect the corporation. 64

Alberta: The Self-contained Design Similarly, the chairman of the board will let the minister know things that might be happening in the corporation which might come up in question period and cause difficulties or embarrassment." Such a generalization, of course, is not very eloquent as to how— indeed whether—differences in the decision perspectives of political and corporate actors were made explicit, and subsequently reconciled, in and around Crown-corporation boards. Instead, the impression is conveyed that reconciliation of public policy and commercial objectives took place automatically as a result of sustained interaction between ministers and board chairmen and that the so-called "agency problems" of Crown corporations were the product of overactive imaginations. Reconciliations "happen rhetorically," said one observer of the Alberta Crown-corporation decision-making process, the problem being that "nobody knows for sure." Warrack, in a case study of the Alberta Energy Company in which he offers several little-known insights concerning this subject, details the reticence of the Alberta government to flex its ownership prerogatives over one particular member of the corporate enterprise group. Such prerogatives, he points out, were "extensive, but implemented with little vigour." The government was the largest owner of AEC, owning 50 per cent of the shares with no other significant ownership blocks; however, it did not "act as a large block owner," neither "stacking" the board nor violating its steadfast "arm's-length" stance. As well, notes Warrack, although the government had the power to amend the constituent act of the company or to introduce regulations— a "potentially potent" tool —no regulations were passed, and the statute was not used as a "big stick" on the company. Finally, according to Warrack, the government had at its disposal the prerogative of "suasion," a tool that might have had "do this, or else" inferences or been used by the government to veto the activities of the company. This veto power, however, was never exercised.25 The Warrack analysis, of course, is a compendium of unwielded ownership prerogatives. It is a chronicle of non-interactions, testifying to the virtual absence of visible confrontation between the boards of directors of Alberta's corporate enterprise group and their governmental proprietors. It is not at all eloquent on the subject of which circumstances, if any, would have prompted the government to actively exercise its ownership prerogatives. A clue to such circumstances — such knowledge is essential to our understanding of the institutional decision constraints applied to this group of Crown corporations—was provided by a senior Pacific Western Airlines executive. "We have always run this company on the basis that we make all policy decisions at the board level and all our own management decisions. There was 65

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nothing from the government, in terms of policy, other than the original caveats." The implication is that as long as Pacific Western Airlines acted to preserve Alberta's position as the "gateway to the north" and the Alberta Energy Company acted as an "investment vehicle" and an instrument of "economic growth and development," the government would not actively bring its ownership prerogatives to bear. Moreover, because the public-policy objectives of these companies took the form of a handful of broad policy caveats, the maximizing behaviours of corporate and political actors were less constrained by substantive public-policy objectives than those of their counterparts within the conventional Crown-corporation sector. To understand the differences in the application of institutional decision constraints, it is necessary to examine the interactions taking place in and around the Cabinetlevel decision forums that constituted the central locus of decision. On the one hand, these interactions, in Alberta, comprised those taking place between politicians serving on Cabinet committees and central-agency (Treasury) bureaucrats, and, on the other, between Treasury officials and corporate actors within the conventional Crowncorporation sector. Alberta politicians, not inclined to constrain themselves with elaborate Cabinet-committee structures and central-agency support mechanisms, preferred what one observer of the Alberta Crown-corporation decision-making process called a "very conscious seat-of-the-pants" approach to Cabinet decision making. Stated this observer, "There may be a certain degree of coordination, qualitatively speaking," in this approach; but "empirically speaking, there are fewer actors, less explicit coordination, and considerably less institutional complexity" than observers of the Ottawa central-agency structure, or the central-agency structures of many other Canadian provinces, might expect. "In Alberta," stated a senior Treasury official, "ministers feel they would rather deal with Crown-corporation issues by themselves and know what's going on rather than have information filtered through some bureaucrat in Treasury." The inclination of Alberta Cabinet ministers to deal with their ministerial colleagues on a one-to-one basis rather than relying exclusively on Cabinet committees, central agencies, and/or other formal consultative machinery was evident in the comments of a former Lougheed Treasury Board chairman: A minister would phone up and say, "Look, I have a problem on this project. We're building it faster than we thought. We want to spend some money from the next quarter. Let's have a cup of coffee and work it out." We'd work it out, tell our executive assistants what we had done, and ask them to take care of the 66

Alberta: The Self-contained Design paperwork. Sometimes it (the answer to the funding request) would be "yes"; sometimes it would be "no"; sometimes it would be "yes, with certain conditions." Most of these things would be worked out quite informally and then officially noted at the next meeting of Treasury Board. What Alberta politicians wanted out of central governmental decision-making processes, said another former Lougheed Cabinet minister, was "government decisions with Treasury advice, not Treasury decisions suckered from the elected government." This comment overstates, somewhat—but not very much—the more generalized sentiment among Alberta politicians that the Alberta government was inhospitable to the internal growth and development of strong central agencies. As such, it would be incorrect to think of the interactions between politicians and bureaucrats within the central decision locus as embodying some form of collegial decision making in which these two kinds of principal actors gathered around the Cabinet table and collectively decided Crown-corporation issues. Rather, emphasized a senior Executive Council official, it was Cabinet ministers who "decided," while Treasury officials—the only bureaucrats who came more than intermittently close to Alberta's Crown-corporation decision-making process —lent advice from a "technical standpoint." The latter pointed out "technical details," while ensuring that the "documentation" was sufficiently complete to support collective decision making by the ministers. Thus constrained, in the sense that the collegiality extended to them by political actors was minimal, Treasury bureaucrats sought to maximize their policy influence—not so much by performing any active or directional role, but rather by taking a passive, subtle, and (in Alberta) traditional role that personified the formal institutional capacity to say "no" to Crown-corporation investment proposals. "It is understood," said a former Cabinet minister, "that ministers and Crown corporations are going to want to go out and build things. Yet there is an overall resource limitation that Treasury has to keep an eye on. It is a watchdog role and it is understood that if anyone wants to play games, Treasury will blow the whistle on them." Treasury officials, commenting on this aspect of the Provincial Treasury's role, described it as "flushing out the disadvantages, or the 'downside,' of going along with any particular proposal," or as representing "the one element in the process that is trying to keep some sort of reins on expansionary spending impulses." This Treasury "watchdog" role, judging from the following comments made by a former Cabinet minister responsible for a number of Alberta Crown corporations, was 67

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seen as something of a pernicious decision constraint by corporate and political actors: There is an enormous strategic advantage in the hands of whoever can say "no," whoever is trying to prevent something from getting done, as compared to those who are initiating things. That advantage has to be countervailed, or else you have a situation in which you are constantly being thwarted by those in the strategic capacity to resist things. People become very sophisticated in how they say "no." You have to know how to cut through all that crap if you want to get anything accomplished. If they don't say "no," they will give you second opinions and more second opinions. Maybe you'll get tired and forget about it and they will have succeeded in making sure that nothing happens. Of course, what they always say is "we're just helping." But, from what I've seen, so many times it is exactly the opposite. The provincial Treasury's oversight of Crown-corporation investment proposals derived from both the Treasury's comptrollership of the annual budget-review process and its stewardship of the Alberta Heritage Fund. Budget-review constraints, as noted earlier, were applied on a "rule-of-thumb" basis by Treasury bureaucrats; they required that certain Crown corporations, notably the "policy Crowns," submit their capital and sometimes operating budgets for Treasury review prior to Cabinet-level approval. The Crown corporation budget-review process, explained a former provincial Treasurer, was a two-phase process. The first phase consisted of a "policy review" in which Cabinet ministers, in their capacity as members of the Priorities Committee of Cabinet, reviewed the mandates, performance, and proposed priorities of individual Crown corporations. Having heard the case put forward by corporate actors, they would then make preliminary decisions as to whether to ratify existing policies or call for modification. This phase of the process did not involve Treasury bureaucrats and was followed, some five or six weeks later, by a more detailed review of Crown-corporation investment proposals by^Cabinet ministers in their capacity as members of Treasury Board. At this point in the budget-review process, Treasury Board ministers proceeded on the basis of a "thoughtful cross-examination" furnished by Treasury officials. It was during the course of this "cross-examination," a practice that applied to the review of interim submissions (investment proposals initiated independently of the annual budget cycle) as well, that the bulk of the interactions between Treasury officials and corporate actors took place. 68

Alberta: The Self-contained Design "It is not uncommon," stated a senior Treasury official, "for us to have (a) sharp disagreement with a Crown corporation as to whether a particular course of action should be followed. If the costs are significant and, from the Treasury's perspective, are not sufficiently justified, clearly our comments would be that an alternative course of action might be considered." On the other hand, stated this official, "we realize that it's a priority to maintain good relationships with Crown corporations and (to) go to some lengths to ensure that our differences are resolved before they become major problems." The mode of reconciliation employed to resolve differences in the decision perspectives of Treasury bureaucrats and corporate actors was described by another Treasury official as follows: "When there is a issue to be dealt with, you work on it together, rather than in separate directions, and work out any differences in approaches. Treasury brings to the table the government's fiscal stance and its public-policy objectives. The corporations bring to the table their concerns about clients, markets, and the environments they are involved in. You pool your resources together to come up with the best option for the minister." An Executive Council official observed that the fundamental characteristic of such interaction was that it was "not a competitive kind of thing." It may be difficult, of course, to imagine a non-competitive resource-allocation process. But we must keep in mind that what Alberta politicians prescribed as the net outcome of budgetary interactions between bureaucratic and corporate actors was a series of unitary recommendations for Cabinet policy decision, rather than a cafeteria of discrete policy options articulated within the context of an adversarialbased evaluation process. They neither sanctioned nor encouraged the use of adversarial evaluation techniques to make explicit and reconcile differences in corporate and bureaucratic decision perspectives within Cabinet-level decision forums. This decision rule obfuscated much of the competitive zeal these two kinds of Crown-corporation decision makers might have employed in pursuing their respective proximate objectives. "Nobody keeps score," explained a former Alberta Cabinet minister, because "it is not an adversarial kind of thing, but more of a 'we're all in this together' kind of approach." During the period investigated oil-rich Alberta was reaping tremendous economic benefits from the upward spiral of oil prices following the 1973 OPEC embargo. Increased production and royalties, as noted by Laux and Molot, generated revenues far "beyond the immediate needs of the provincial government."26 Seeking an investment strategy to optimize the use of these funds while further diversifying its resource-dependent provincial economy, the Alberta government created its vaunted Heritage Savings and Trust Fund. Treasury's 69

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stewardship of the fund, ostensibly a reservoir of institutional decision constraints for preserving and husbanding the wealth of the firm, more closely resembled—in practice—an extension of the Crown-corporation's capital-resource-allocation process. The practice was simply to cover Crown-corporation borrowing requirements with loans from the Heritage Fund. Some critics of the Alberta Heritage Fund, for example Tupper and Pratt, concentrated on the accountability aspects of fund decision making. 27 The Canadian investment community, on the other hand, often criticized what it saw as the essential passivity of the government's Heritage Fund investment strategies, its funding of Crown corporations, and the reluctance of the Alberta government—until the early 1980s—to use the Heritage Fund to make equity investments in private-sector corporations. One financial journalist, seeking to decipher interactions taking place in or around the Alberta Heritage Fund, professed to be stymied by what he called the "separate reality" of the provincial Treasury. Confronted by central-agency bureaucrats trying their unobtrusive best to avoid the appearance of being such in an administrative environment where central agencies and centralagency bureaucrats were officially frowned upon, he described this milieu as "suffused with loyalty, duty, and a weird and stubborn sense of history."28 It is possible to demystify the dynamics of Heritage Fund decision making by interpreting them—as was suggested earlier—as an extension of the Alberta Crown-corporation capital-resource-allocation process. This is not an unreasonable proposition, given the substantial component of the fund that, in the words of one former Cabinet minister, was subsumed not by investing in "big, bad Eastern corporations" but in "paper investments in Alberta Crown corporations, which are at least investments in Alberta." Irrespective of the funding source—the Heritage Fund, or conventional appropriation structures— Crown-corporation investment decisions, in Alberta, were based on an approach to Crown-corporation capital-resource-allocation that subjected Crown-corporation investment proposals to a most careful caseby-case evaluation, but was not driven by any explicit capital-rationing principle. This orientation, the dynamics of which we return to shortly, was explained by one senior Crown-corporation executive by the comment that "we have not had a capital rationing problem out here for the past 25 or 30 years." Observation of the institutional decision constraints conditioning the interactions of different kinds of Alberta Crown-corporation decision makers revealed a remarkable degree of consensus, verging on 70

Alberta: The Self-contained Design unanimity. Indeed, a cross-section of principal actors held that overt competition for scarce resources had been all but expurgated from the Crown-corporation capital-resource-allocation process, and that the maximizing behaviours of politicians, bureaucrats, and corporate actors were effectively constrained as well. This "calculus of consent," as noted earlier, reflected the fact that government decision making in Alberta, as exemplified within Cabinet-level decision forums, was based on a unitary case-by-case approach to decision making in which adversarial relationships were discouraged. A related consideration— actually a widely held perception among Alberta politicians, bureaucrats, and corporate actors—was the concern that further "bureaucratization" of the Crown-corporation decision-making process would almost certainly result in the creation of "antipathies" among principal actors at all levels of the process. Resistance to such "bureaucratization," in the Alberta context, was synonymous with resistance to the establishment of centralized modes of information collection and processing dedicated to the systematic monitoring of Crown corporation performance. "It's the system you have to be suspicious of," said one former Cabinet minister, because it is "no substitute for doing things on a face-to-face basis, where the necessary trust coefficient can be established." INFORMATION AND INFORMATION PROCESSING The monitoring of Crown-corporation performance in Alberta was based on a pragmatic approach to information and information processing. That approach placed a high priority on making the appropriate information available when and where it was needed for specific decisions, but a lower priority on the systematic collection and analysis of information to support central decision making on an ongoing basis. With only a very short list of decisions lodged within the government's central institutional structure, the general orientation was to keep most information as close as possible to where it was needed on a continuous basis—close, that is, to the board and management personnel of the individual Crown corporations, to whom most decision making had been delegated. Exceptions to this general rule, explained a former Lougheed Cabinet minister, occurred only with "policy" decisions. Whenever there was a need for information to support a strategic decision on the government's "short-list," said this minister, it became a question of "will you please make this information available to me." The basic information-sharing relationship between the Alberta government and its Crown corporations thus reduced itself to one in which 71

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politicians (sometimes bureaucrats acting on their behalf) got to ask for information to support their "policy" decisions, but corporate actors got to supply it. Alberta politicians were much more eloquent on their intent to differentiate between "policy" and "administrative" decisions than on their ways of achieving that differentiation. There is little doubt, however, that they evolved vastly different working definitions of what constituted a "policy" decision, in practice, within the corporate enterprise group, on the one hand, and the conventional Crown corporation sector, on the other. Tupper, in his case study of PWA, observed that the government, if called upon by the corporation to make decisions of a controversial nature (concerning acquisition of competitors, for example; or route changes), would view its role as one of either approving or rejecting proposals initiated by the corporation.29 Similarly, in the case of the Alberta Energy Company, the decisions to change the mandate of the company and to undertake additional share offerings —both of which required legislative amendments—were described by Alberta politicians as having been initiated by the board, management, and shareholders of the company and then simply ratified by the government. Because there is no evidence that such decisions were actually initiated by the Alberta government, it is difficult to refute the argument advanced by Alberta politicians that these decisions were not "policy" decisions on the part of the Alberta government, but rather "managerial" decisions, undertaken by PWA and AEC and subsequently ratified by the Alberta cabinet. This argument, if taken to its logical conclusion, would suggest that the only "policy" decisions ever initiated by the Alberta government with respect to these companies were the decisions to establish AEC and acquire (and subsequently divest) PWA. Neither this argument nor its logical conclusions was ever disputed, either by corporate actors within the corporate enterprise group or by Treasury officials. Moreover, neither group could recall any specific instance in which Cabinet, or any of its committees, had called upon treasury officials, or any other bureaucratic actors to perform a "cross-examination" of information supplied by either of these two companies to substantiate their proposed decisions. The working definitions employed by Alberta politicians to demarcate "policy" decisions in the conventional Crown-corporation sector were much less elusive than those definitions employed to virtually assume such decisions out of existence in the corporate enterprise group. Such decisions, in practice, consisted of those the provincial Treasury considered, as noted earlier, to have "strategic financial significance"; or those that were likely, in the view of Cabinet, to 72

Alberta: The Self-contained Design have important distributional effects or strategic political consequences. Treasury officials, who tended to define such decisions in terms of their likely impact on the province's financial structure, usually singled out decisions of a capital-intensive nature as examples of policy decisions. They cited, for example, the decision by the Alberta government to embark, during the late 1970s and early 1980s, on a program of land assembly and mortgage underwriting, jointly administered by the Alberta Housing Corporation and the Alberta Home Mortgage Company, which had the objective of providing "reasonable housing at reasonable costs to Alberta residents."30 They also described as "policy" decisions subsequent decisions by the Alberta government when it was confronted, during the mid-1980s, with the problem of having assembled a rather sizeable land base for which only negligible demand existed. The policy decision was whether the government should issue foreclosures on mortgages it had earlier underwritten. What differentiated the Alberta government's approach to "policy" decisions in the conventional Crown-corporation sector—aside from the fact that such decisions were actually acknowledged to exist—was that Alberta politicians devised some rudimentary methods of information collection and processing on which to base their individual and collective decision making. The incentive to carefully monitor Crown-corporation performance began, said a former Cabinet minister, with "a very clear understanding on the part of Albertans that there is a right to go right to the minister and ask him for an explanation of practically anything that goes on." The minister's capacity to respond—either to individual queries or to questions raised in the legislature—depended on the strength of the "alliance" forged with the corporation's board of directors. Whatever information sharing took place within this relationship was then, naturally, more the product of the direct, personalized, and idiosyncratic mode of interaction favoured by most Alberta politicians than of any deliberate or systematic information-processing design. "There are ministers, and there are ministers," explained one Executive Council staffer; while some had "a very tight reporting relationship with their corporation," others took the approach that Crown corporations were "clearly (at) arm's-length, and judiciously applied that kind of relationship." It was very much the choice of individual ministers as to whether they would have an abundance, or a paucity, of information about the performance of the Crown corporation for which they were responsible. It was when ministers convened within Cabinet-level decision forums, to collectively decide substantive "policy" issues, that the 73

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need for more systematically derived information became increasingly obvious to them. Such issues, as noted earlier, were brought to the attention of Cabinet or one of its committees either during the annual Crown-corporation budget-review process or as a result of a "request for decision" on an interim submission. If the ministers on the committee decided they required information beyond the documentation provided by corporate actors, it became the responsibility of Treasury bureaucrats to collect and process whatever additional information was required. However, the "cross-examination" instrument revealed an unusual paradox. On the one hand, most Alberta Crown-corporation decision makers consistently lauded corporate boards of directors as a "valuable information-gathering mechanism," one that had "very good intelligence networks" into external commercial environments. The same positive recognition was rarely extended, however, to the internal information gathering and intelligence role performed by centralbureaucratic monitoring agents to support Cabinet-level decision processes. "If you had a large governmental bureaucracy reviewing the activities of Crown corporations," said one Treasury staffer, "you would have a lot of frustration on the part of senior Crown-corporation executives." The reason why the emphasis in Alberta was not on a "lot of routine, ongoing information collection and analysis," added another Treasury staffer, was because Cabinet often had to make decisions "right away" in order to be responsive to public-policy issues; if Cabinet "waited until it had comprehensive information on what was happening in order to make decisions, it would be too late." In short, one did not hear much contemplation, within the hallways of Alberta's provincial Treasury, concerning bigger and better, newer and more sophisticated, "management information systems" for the surveillance of Crown corporations. Suggesting, for example, to Alberta central-agency staff that a central agency of government be charged solely to monitor Crown-corporation performance—as was the case within other Canadian jurisdictions —invariably prompted the response, "Well, that's anathema to Alberta because where would the minister fit in? He would be almost secondary to the central agency." As one Executive Council staffer put it: "We're less bureaucratic about it. We don't have bodies interceding between the ministers and the Crown corporations. I guess we're still enjoying the "good old days" in terms of the way we operate these organizations. And as long as they don't proliferate too much we're probably going to be able to continue in that way." It is certain, despite the relatively low profile of Treasury bureaucrats 74

Alberta: The Self-contained Design and the pervasiveness of antibureaucratic sentiments within the Alberta Crown-corporation decision-making process, that Treasury had an ongoing responsibility—on a case-by-case basis—to collect and analyze whatever financial information Cabinet-level, decision-making forums required for approving major investment decisions proposed by Alberta Crown corporations. As one central-agency staffer explained: "There is no strict format but information gets there when it is needed. There is no way, even though formally you might not see it, that a Crown corporation can get (a major investment proposal) past Treasury, as an agent of the government, without some intense discussion." In such instances, Treasury's information-gathering and analytical role consisted almost exclusively of monitoring financial information pertinent to gauging the effects of Crown-corporation investment proposals on the basic funding structures of the province. This exercise focused not only on the magnitude of the investment proposals, but also on the question of "where the money should come from," meaning it contained both critical (evaluative) and facilitative elements. Facilitative elements—essentially a rolling calculation of financial resources available to fund approved investment proposals—required little information not at the immediate disposal of Treasury. Such information, generally speaking, consisted of allotment data, audited financial statements, monthly or quarterly cash-flow information, and other key financial data that varied from corporation to corporation. The critical elements of Treasury's information-gathering and analysis role—those involving calculation of the magnitude of Crown-corporation investment proposals — were dependent for their success on the quality and quantity of information made available to Treasury monitoring agents by corporate actors. This constraint was described by a Treasury official as follows: "Ultimately the quality of information they (corporate actors) give us—and to some extent the quantity—is in their hands. They do not typically hold back information but their priorities are not the same as ours. They might not give us the quality or quantity of information we would like to have." Alberta Crown corporations were not required to submit either corporate strategic plans or corporate performance data to either Treasury or any other central agency. Information initially available to Treasury monitoring agents for evaluating Crown-corporation investment proposals consisted only of information contained within the investment proposal—a capital budget submission in the case of a "policy Crown," an interim submission in other cases —and very little else. One central-agency staffer noted that there was no information 75

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about markets, strategic underpinnings, or other pressures. "Therefore, we start from 20 or 30 pages of figures and tables, which indicate the expected financial commitments, and we ask questions." "Asking questions," as in any effective cross-examination, meant asking for "pertinent information" to assess whether there was, for instance, a logical and consistent rationale for the investment proposal. "Contesting" meant asking whether those people initiating the proposal had "thought through" what it was they were asking for. "Presenting the evidence" obliged corporate actors to support their investment proposals. According to Treasury officials, the one factor constraining the effectiveness of this information-gathering exercise was "timing." Submissions went to Treasury Board, before being passed on to Treasury for processing prior to the next Treasury Board meeting. "So the ministers already have the submission. We go to the corporations and ask for additional information which is needed to back it up. It is rather an intensive exercise that has to be completed within a very short period of time." There is no reason to presume that this iterative approach to the evaluation of Crown-corporation investment proposals did not result in the provision of additional information to support unique investment decisions on a case-by-case basis. That this approach was constrained in its ability to take into account competing investment proposals or variations in planned and actual corporate performance was a consequence of the mode of evaluation preferred by Cabinet decision makers. In Alberta, monitoring was designed to assure information availability for the support of unique investment decisions on a caseby-case basis, rather than for a particularly competitive or rigorous, capital-resource-allocation process. The fact that central monitoring agents had no assured access to the key planning assumptions of Crown corporations, or to the actual Crown-corporation performance data, was not viewed as either a weakness or a problem in the monitoring process. If this constituted an information constraint for Alberta politicians in their own collective investment decision-making role, it was a constraint of their own making. Substantive responsibility for the monitoring of corporate performance, like the responsibility for corporate strategic planning, resided almost exclusively within the boards of directors and managements of individual Crown corporations. Key planning assumptions and corporate performance data constituted information that need not be shared with central monitoring agents. The exceptions, as discussed above, were in situations in which major investment decisions were about to be decided within a Cabinet-level decision forum. Even in these situations, however, the information that Treasury monitoring agents were 76

Alberta: The Self-contained Design mandated to extract from corporate actors did not approximate that which might have been demanded within a more competitive capitalresource-allocation process. Nor did Treasury monitoring agents have very much information of their own with which to verify the information supplied by corporate actors. As such, these centralbureaucratic-monitoring agents were in no position to function as an alternative, ongoing source of information to political actors about the intentions and performance of Crown corporations. It is thus difficult to reject the conclusion that the information advantage in the Alberta Crown-corporation decision-making process overwhelmingly belonged to corporate actors directly responsible for the management of individual Crown corporations. Such an information advantage, of course, is multiplied many times if, as was the case in the corporate enterprise group, corporate actors were obliged to provide no information whatsoever to central bureaucratic monitoring agents. According to, respectively, PWA and AEC spokesmen: They never saw our budgets. They never knew what our plans were. There was no input at all in the direction of the company. None. That was laid down by the Premier at the time of the acquisition, that no one in the government was to go near the airline or have any authority over it other than the designated minister. Everything in AEC starts and stops with senior management and the board of directors. It is a very interesting reporting relationship—or lack of reporting relationship—we have with the government in that we give no reports to the government, we file no reports with any legislative committee, we don't go to the Heritage Fund committee, or anything. It's an area that has kind of perplexed some political science scholars.

STRATEGIC BEHAVIOUR The proposition that politicians claim credit for the activities of Crown corporations when such activities are likely to have positive political returns, but distance themselves in situations where political returns are likely to be negative or zero clearly applies to the Alberta Crowncorporation decision-making process. One dimension of the selective responsibility equation—the ability of politicians to distance themselves from the instrument in adverse political circumstances—was sanctioned to the point of becoming normal ministerial behaviour visa-vis Crown corporations within the corporate enterprise group. It was practised with somewhat less vigour in the case of "policy Crowns" within the conventional Crown-corporation sector, although Alberta 77

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politicians were more apt to claim credit for the public-policy performance of these corporations. In the case of Crown corporations within the corporate enterprise group, Alberta politicians did not overtly claim too much credit. Instead, they tended almost to apologize for the creation of these companies, leaving their commercial successes—which were considerable—to speak for themselves. Such behaviour, of course, testifies more eloquently to the political actors' adaptation to what they saw as public dislike of government intervention ism and the Crown-corporation instrument, rather than to some form of ministerial altruism indigenous to Alberta. Opposition members of the Alberta legislature, during question period, soon found out that the Alberta government not only sanctioned ministerial distancing from the affairs of its corporate enterprise group, but actually sanctified such behaviour. The following ministerial replies to Opposition questions about these companies were typical: We have always taken the position that PWA should be operated in a hands-off manner, in terms of the day-to-day, week-to-week operation of the company. I have had no discussions with officials of PWA regarding the matter raised by the honourable member, nor do I intend to.31 No, we didn't have any discussion about that. That was, of course, a management decision. I may just simply say, Mr. Speaker, (that) that's in keeping with our policy—that when we set up the Alberta Energy Company, the government, although a 50 per cent shareholder, would not be part of the management. I think that policy is the reason for the great success of the company.32 Thus, during the period in which the Alberta Energy Company was over 50 per cent, and Pacific Western Airlines over 99 per cent, owned by the Alberta government, the proceedings of the Alberta Legislature were replete with ministerial prefixes and suffixes disclaiming responsibility for issues or problems held by Opposition members to be besetting these two companies. Ministerial prefixes, for example, would contain the disclaimer "that would be a management decision that would come about after a recommendation from the management team to the board of directors," or "I consider that to be a matter that's certainly within the adequate responsibility of the board of directors and the management of the company."33 Ministerial suffixes, usually more or less interchangeable with the prefixes, included such comments as "I'll transmit that to the board of directors," or "that policy has been conveyed to the board of directors (and) in due course, 78

Alberta: The Self-contained Design we'll hear about that."34 Ministerial utterances of the foregoing variety doubtlessly contributed to the motivation of the late Grant Notley, New Democratic Party (NDP) Opposition leader, to formulate a rather eloquent working definition of selective responsibility, as practised in Alberta at the time: Let me say that it's always interesting to hear the government try to justify its relationship with PWA. Whenever there were any hot potatoes, whenever PWA was getting itself into apparent trouble, the minister would say: "Well, I can't answer that, that's a detailed question. Go to the chairman of the board of PWA and he will give you the answer." Whenever there was good news, which wasn't very often, the minister would be quite pleased to present us the good news. But, typical of this government, good news will get in(to) the Legislature, bad news is somebody else's responsibility.35 Alberta politicians, by obfuscating their involvement in most "policy" matters relative to the corporate enterprise group and by characterizing most opposition questions as having to do with the "operations" of these firms, were able to practise the distancing component of selective responsibility in a relatively unconstrained fashion. In certain instances, however, when an Opposition question touched upon one of the policy caveats held by the Alberta government to apply to these companies, ministerial responses were somewhat less evasive than a flat denial of responsibility. For instance, when asked by an Opposition member what the "time frame" would be for Albertans to exercise their preference in the first, public share offering of the Alberta Energy Company, the designated minister replied "Because it (the question) does relate to the policy of the government that preference be given to Albertans, I will check that matter with the company and advise the honourable member."36 Also, when questioned by an Opposition member as to whether AEC was about to engage in its own oil-drilling activities (an activity not in the company's mandate), the minister's response was "It tends to be a matter that does get into the general policy matters we have discussed with the energy company; therefore I'd like to look into it and advise the honourable member."37 But such acknowledgements of ministerial responsibility were infrequent. No such acknowledgements, furthermore, were ever made in the Alberta Legislature to clarify the extent to which conventions of ministerial responsibility applied to the other member of the corporate enterprise group, Pacific Western Airlines. In the case of the conventional Crown-corporation sector, ministerial 79

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behaviour was constrained by substantive public-policy objectives rather than policy caveats. The practice of selective responsibility was constrained as well, to the extent that it included subtle forms of ministerial distancing, but stopped well short of flat disclaimers of ministerial responsibility. During the mid-1980s, for example, the economic circumstances that had motivated the establishment of the land assembly and mortgage underwriting programs of the Alberta Housing Corporation and the Alberta Home Mortgage Company gave way to a nearly obverse set of economic circumstances. The ministers responsible for these two Crown corporations were frequently questioned about accumulated land and housing inventory levels, the government's policies governing foreclosures in arrears situations, and the practice of indirectly subsidizing the embarrassing losses of these two companies by loaning them money from the Alberta Heritage Fund. The designated ministers did not label these as "managerial" problems, nor attempt to shift responsibility away from themselves to the boards and managements of these two corporations. Rather, they blamed what they described as "unforeseen circumstances," one minister stating, "Clearly, no one anticipated the real estate market we have had from '82 until the present, so we didn't anticipate the mortgage fund would be depleted the way it was."38 Although they dutifully responded to Opposition questions, they also made a practice of claiming credit for having initiated the program in the first place. Indeed, they constantly reminded the Opposition and the media that Alberta had "the best-housed citizens in Canada" and argued that the "reasonable housing at reasonable costs" policy had not been a mistake, despite the prevailing circumstances. This approach was in complete contrast to the ministerial handling of two unsuccessful investment decisions of the Alberta Energy Company: the acquisition of Willowglen Ltd., a Calgary electronic systems firm that was subsequently written off by AEC; and AEC'S purchase of a minority interest in British Columbia Forest Products Ltd., a transaction that ultimately resulted in substantial losses for AEC. In such instances, recalled a senior AEC executive, the government did not hesitate to say, "Well, AEC has an independent board; they are acting in the best interest of the shareholder so, you know, it's got nothing to do with us." Such ministerial behaviour might at first have been taken to suggest the existence of a private-sector type of an arrangement, one in which corporate management, in exchange for having their managerial discretion assured by the proprietors of the firm, are held fully accountable for their investment decisions. Rather than demand detailed, public explanations of these inopportune investment decisions, however, the government simply allowed that it fully 80

Alberta: The Self-contained Design expected "to have the occasional (investment) that does not return a profit.39 It is clear that investment miscalculations were rare within the Alberta government corporate enterprise group. Nevertheless, the muted response of Alberta's government to such miscalculations, when they did occur, suggests—as was noted earlier—that Alberta politicians would not actively exercise their ownership prerogatives unless one of their policy caveats were at stake. To the extent that these policy caveats were not violated, corporate actors in the corporate enterprise group had the requisite managerial discretion and relative autonomy to make their own investment decisions and to orient themselves almost exclusively to the pursuit of commercial objectives and corporate growth. Such maximization was acceptable to Alberta's politicians as long as they could maximize the likelihood of their own re-election by distancing themselves completely from the affairs of the corporate enterprise group in adverse political circumstances, while still anticipating positive political returns from the commercial successes of these companies. The proposition that politicians extend enhanced managerial discretion and relative autonomy to corporate actors in exchange for enhanced sensitivity to their public-policy objectives also clearly applies to Alberta's Crown-corporation decision-making process, although not in the case of the corporate enterprise group. In that case, the maximizing behaviours of politicians and corporate actors were constrained by a handful of general policy caveats—not by substantive public-policy objectives—and rested not as much on any need to make trade-offs between commercial and public-policy objectives as on their shared assumption that these two kinds of objectives were virtually synonymous. To suggest that corporate actors within the corporate enterprise group would indulge in selective rationality and subordinate commercial objectives to public-policy objectives that had been effectively assumed out of existence is a tenuous proposition. It demonstrates the converse of the proposition of selective rationality; that is, that there is little incentive for corporate actors to sensitize themselves to imputed, as opposed to substantive, public-policy objectives. In the words of one AEC senior executive, "Petro Canada started the same year we did. One of the things we lived with for the first year or so was ... (that) the Alberta Energy Company is Alberta's Petro Canada. If we did nothing else in our first two or three years, ... we established credibility that we were not an instrument of public policy; that we were genuinely 100% commercially and profit-based." In the case of the conventional Crown-corporation sector, however, public-policy objectives were more substantive; for example, one was 81

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geared to supplying "reasonable housing at reasonable prices for Alberta residents." To suggest that corporate actors practised selective responsibility and subordinated commercial objectives to public-policy objectives so as to maximize their own managerial discretion and relative autonomy is not such a tenuous proposition. The reason for this, aside from the fact that ministerial distancing was less of an option for political actors, was that most corporations within the conventional Crown-corporation sector—unlike those within the corporate enterprise group—were not financially self-sustaining. Their performance and their investment proposals were subject to the "crossexamination" of central-bureaucratic-monitoring agents. Corporate actors, as noted earlier, had a considerable information advantage over these monitoring agents, but their managerial discretion and relative autonomy were constrained by the fact that they required financial subsidization in the first place. Unable, at the central decision locus, to avoid completely the decision constraints imposed by the presence of Treasury monitoring agents, corporate actors concentrated their strategic behaviour on the relationship between ministers responsible for Crown corporations and individual corporate boards. Far from being "rhetorical" in nature, this direct, personalized, and idiosyncratic relationship provided an ideal forum for corporate actors to practise selective rationality. It permitted them to sensitize themselves to the public-policy objectives (and incentives) of political actors and, at the same time, to preclude decision constraints that might otherwise be imposed by centralbureaucratic-monitoring agents purporting to represent such objectives. Designated ministers, constrained by the same public-policy objectives and thus restricted to subtle forms of distancing that did not include outright disclaimers of ministerial responsibility, depended more directly on corporate actors to fulfil their ongoing information needs than on central-bureaucratic-monitoring agents (whose information-processing role reduced to "cross-examination"). This exchange-relationship is a positive explanator of how the decision perspectives of political and corporate actors were reconciled at the individual board level and why Crown-corporation boards constituted the actual centre of gravity within Alberta's Crown-corporation decision-making process.

ORGANIZATION DESIGN Information-processing and decision-making practices by which Crown corporations were linked to the Alberta government, interpreted from the standpoint of alternative Crown-corporation organization 82

Alberta: The Self-contained Design designs theoretically available to structure the government/Crowncorporation decision-making relationship, most closely approximated the self-contained Crown-corporation organization design. Alberta practice incorporated a structural differentiation of decision categories and responsibilities that sought to locate only a very short list of decisions within the central institutional framework of the government, locating all other decisions within the boards of directors of individual Crown corporations. For the most part, this practice conformed with the emphasis on autonomy of decision making by individual Crown corporations predicted by the self-contained Crown-corporation organization design. Also, because information collection and processing to support the Alberta Crown-corporation decision-making process was concentrated in or around the boards of directors of individual Crown corporations—not within the central institutional framework of the Albertan government—Alberta's practice conformed with the emphasis on autonomy of information processing predicted by the self-contained Crown-corporation organization design. Information-processing and decision-making practices within Alberta's Crown-corporation decision-making process, as predicted by the self-contained Crown-corporation organization design, resulted in a considerable information advantage for corporate actors responsible for the management and operation of individual Crown corporations. This distribution of information advantage was most advantageous to the corporate actors' maximization of their own managerial discretion and relative autonomy, and least advantageous to the bureaucratic actors' maximization of their own policy influence within the Crowncorporation decision-making process. One consequence of Alberta's self-contained Crown-corporation organization design was a greater amount of corporate autonomy than institutional control. Some of its other consequences are discussed in chapter 6.

83

Chapter Four Manitoba: The Vertical Information Systems Design Information-processing and decision-making practices linking Crown corporations in Manitoba to the Manitoba government evolved within an administrative environment whose inhabitants viewed the Crowncorporation instrument with profound ambivalence. Attracted, for the most part, by the presumed economic development potential of the Crown-corporation instrument, Manitoba politicians repeatedly committed themselves to "using public investment as a means of sparking economic activity and private investment."1 But the dismal economic performance of Manitoba's commercial Crown corporations and the history of ineptitude and corruption in their management and operation was enough to test the commitment of any government to the use of the instrument. The response to such problems, notably the response of the Howard Pawley NDP administration (1981-88), was to emphasize the publicpolicy achievements of Manitoba Crown corporations—regional distribution of capital projects, for example, or job creation—and to deemphasize their commercial shortcomings. The Pawley government, moreover, exhibited a near obsession with administrative propriety in the management and operation of Crown corporations. This focus resulted in a series of organizational innovations dedicated as much to assuring appropriate standards of ethics and decorum in the conduct of government enterprise, as to achieving a more effective use of public investment capital by Manitoba Crown corporations. What we are interested in, of course, are the effects these innovations had on the balancing of corporate autonomy and institutional control within the Manitoba Crown-corporation decision-making process. The origins of the Manitoba corporate enterprise group, a term I use to describe all Manitoba commercial Crown corporations, can be traced back to the Edward Schreyer NDP administration of the early to

Manitoba: The Vertical Information Systems Design mid-1970s (1969-77). The Schreyer years, by most accounts an activist era of politics and government in Manitoba, ushered in an expansion of Manitoba's traditional, utility-based Crown-corporation sector. A patchwork of government-enterprise initiatives were included, some of which were "purposeful," according to Laux and Molot, and some of which were "reactive."2 "Guidelines for the Seventies," a widely circulated economic-planning document prepared by the Schreyer government, articulated a strong preference for "the use of Crown corporations at the provincial and local level to greatly influence the nature and structure of production in Manitoba"; it also lauded the Crown corporation as an "essential instrument" to be "used by this government when appropriate."3 And use it, they did. This era witnessed the controversial creation of the Manitoba Public Insurance Corporation (MPIC), the province's government-owned automobile insurance plan. During this period as well, the Schreyer government transformed an industrial loan fund set up by the Roblin Progressive Conservative government (the Manitoba Development Fund) into a Crown corporation called the Manitoba Development Corporation. This decision, which had the effect of converting a number of essentially uncollectible Manitoba Development Fund loans into equity investments held by the Manitoba Development Corporation, resulted in the acquisition of several charter members of the Manitoba corporate enterprise group. Described by one Winnipeg Free Press columnist as "an eclectic collection of failed private sector ventures that comprise most of Manitoba's stable of taxpayer-owned companies," this group included Churchill Forest Industries (later known as Manitoba Forest Resources Limited (ManFor), Flyer Industries Ltd., and A. E. McKenzie Co. Ltd.4 These firms were not the only companies to become wholly owned subsidiaries of the Manitoba Development Corporation and thus of the Manitoba Government. But they were certainly the ones destined to become household words in Manitoba in the 1970s and 1980s. Churchill Forest Industries — a forestry and pulp-mill complex started in The Pas, Manitoba, by a group of private investors who obtained most of the funds required to set up the operation from the Manitoba Development Fund—was only partly completed and had fallen into receivership at the time of its take-over by the Schreyer administration in 1971. A judicial inquiry set up by the Manitoba government at the time of the take-over revealed that the prime developer of the project, who controlled nearly all of the companies developing the forest complex, had obtained more than $30 million of government funds by fraudulent means, nearly all of which found its way into foreign banks rather than the project. By the time it was put 85

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into receivership, the venture had cost the Manitoba government more than $120 million.5 A succession of drawn-out legal battles, the eerie penchant of the developer of the project (who could not be extradited from his native Austria) to offer front-page advice via the Winnipeg Free Press to the management of ManFor, and the fact that ManFor was a consistent and heavy money loser resulted in widespread public scepticism about this Crown corporation. Repeated demands for its privatization resulted. In 1977, Sterling Lyon's opposition Progressive Conservatives (PCS) came into power for a four-year term. Although their leader had often called for the privatization of various Manitoba Crown corporations and had been fond of saying that "the socialists could not run a peanut stand,"6 the PCS dismantled practically none of the Crown corporation they had earlier decried. It was, however, often rumoured during the Lyon years that ManFor, Flyer Industries, and A. E. McKenzie were about to be repatriated to the private sector if an appropriate buyer could be found. But the only corporations privatized by the Lyon government were four minor firms only partially (less than 50 per cent) owned by the Manitoba government: a door factory (Dormund Industries Ltd.); a plastics manufacturer (Dawn Plastics Ltd.); a food processor (Best Pak Ltd.); and a computer-consulting firm (Cybershare Ltd.).7 In fact, the only controversial privatization undertaken by the Lyon government was the partial privatization of Manitoba Venture Tours (MVT) Ltd. This move was controversial because it deprived MVT of the cruise ship Lord Selkirk, which for years had carried the flag of the Manitoba government corporate enterprise group as it shuttled tourists and conventioneers across Lake Winnipeg to a government-owned island tourist lodge. When the New Democrats returned to power in the fall of 1981, they found that the corporate enterprise group assembled during the Schreyer years had survived relatively intact. In addition to ManFor, which had often been threatened with privatization during the Lyon years, surviving members of the group included Flyer Industries, a Winnipeg-based manufacturer of diesel and electric transit buses; and A. E. McKenzie Co. Ltd., a Brandon-based seed packing and distribution firm. Although Manitoba government involvement in Flyer Industries began with a modest $2-million investment in exchange for 25 per cent equity in the company in 1971, it reached $96 million (98 per cent equity) by the spring of 1986. At that time the Pawley government paid a Dutch manufacturing firm $3 million to assume ownership, in exchange for promises to adhere to a business plan that would keep Flyer and most of its workforce within Manitoba.8 A. E. 86

Manitoba: The Vertical Information Systems Design McKenzie Co. Ltd., a firm bequeathed to the Manitoba government in 1945 subject to the government's provision of continuing financial support to Brandon University, did not experience financial problems of the magnitude experienced by ManFor or Flyer Industries. It nevertheless proved to be a continuing source of embarrassment to its governmental proprietors, in part because the company came to depend on increasing amounts of public investment. But any controversy deriving from the periodic financial restructuring of the company was minimal compared to the three-year political furore (1983-86) that erupted as a result of the investigation and conviction of three senior McKenzie executives on charges of conflict of interest and criminal fraud. During the 1981 Manitoba general election campaign, Howard Pawley announced that an NDP administration would diversify the activities of the Manitoba corporate enterprise group by setting up a new Crown corporation—the Manitoba Oil and Gas Corporation—to enter into joint ventures with publicly and privately owned resource corporations exploring for oil and gas in Manitoba. Making his announcement on the site of a SaskOil drilling rig located just within the Manitoba border, Pawley declared: "The profit from these wells goes to the people of Saskatchewan, because their government is committed to public investment in energy development."9 One of the first acts of the Pawley government was to legislate into existence the Manitoba Oil and Gas Corporation, a Crown corporation with a mandate to "promote exploration and development of oil and gas in the province as a direct participant in the industry."10 This company commenced operations in January 1984, nearly three years later. Shortly thereafter, the province obtained a 49 per cent share of a joint venture with Canamex Resources Inc. to develop Manitoba's first potash mine.'' These developments reflected the intention of the Pawley administration to shift its government enterprise initiatives to the energy and resource sector, avoiding the manufacturing and industrial development area, which Schreyer's government had emphasized. This reorientation of government enterprise priorities, however, was overshadowed by the determination of the Pawley government to "reform" the institutional framework of the Manitoba government's Crown-corporation decision-making process. Within the first month of the new administration, the premier's office reprimanded both the Manitoba Telephone System and the Manitoba Public Insurance Corporation for "harsh and ill-considered" treatment of Manitobans. The premier said that a series of such incidents had prompted him to send letters to all Manitoba Crown corporations, urging them not to be 87

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"high-handed" in their dealings with the public but to ensure Manitoba residents "reasonable and fair" treatment by government-owned corporations.12 Less than two weeks later, the government announced it was setting up a new Department of Crown Investments (DCI) to "oversee and coordinate capital spending and investments of all provincially owned corporations." "It is important," said a cryptically worded government news release, "to ensure that the investments of Crown corporations are coordinated and the process of investment fit in with an economic strategy that the government of the province might have in mind."13 The Department of Crown Investments was hailed, at least by some academics, as "an innovative structure in Canada"14—one that could be used to fashion the government/Crown-corporation decision-making relationship. The Pawley government, for its part, delighted in pointing out in the Legislature that Manitoba was breaking "new ground," that Manitoba "has been a front-runner in this area of public administration," and that "once again, the West is leading the way."15 Less was said, of course, about the fact that Manitoba still had neither a single statute dealing with Crown corporations nor any formal classification system or scheduling devices to distinguish among different categories of government enterprise. Nor did the government mention that "neither formal requirements for submission of budgets nor formal review procedures existed for most Crown corporations" 16 prior to the DCI initiative, a control vacuum the DCI might logically have been create to address. At any rate, the Winnipeg Free Press headlines announcing the creation of the new department read "NDP Super-Agency to get 'Grip' on Crown Corporations," an expectation that was to become more than slightly dampened by the fact that, much of the time during the 1980s, the Manitoba Legislature was dominated by charges of incompetence, impropriety, and criminal behaviour in and around a number of Manitoba Crown corporations. The most infamous case arose from the antics of MTX , a commercial subsidiary of the Manitoba Telephone System, which experienced serious financial losses and humiliating embarrassments while attempting to do business in Saudi Arabia. "Somewhat ironically," stated Thomas of the University of Manitoba in an unpublished paper called "Trouble with Crowns in Manitoba," "Manitoba has in place, at least on paper, one of the most welldeveloped frameworks for the direction, control and accountability of Crown corporations of any of the ten provinces. And yet the system apparently broke down."17 It broke down, in fact, several months prior to the defeat of the Pawley government by Gary Filmon's Progressive 88

Manitoba: The Vertical Information Systems Design Conservatives and was replaced by a Crown-corporation holding company. Because the holding-company approach was the inheritor of the information-processing and decision-making practices which came into being during the DCI era, an analysis of the dynamics of Crowncorporation decision making in Manitoba during that period is not without significance to contemporary observers of decision-making behaviour in and around Manitoba Crown corporations. ORGANIZATION AND DIRECTION The key to the system of direction and control of Manitoba Crown corporations during the Pawley years was the provincial Cabinet; in particular, its Economic Resources Investment Committee (ERIC). This committee, to which the DCI reported, was one of two policy subcom mittees of Cabinet (the other, a social policy committee, had no interface with Crown corporations) which, along with Treasury Board, were the major ongoing committees of the Manitoba Cabinet. Each of these policy subcommittees, as noted in a 1986 internal consulting study,18 consisted of ministers with related portfolio responsibilities who were charged with achieving "priorization, consistency, and coordination" of sectoral policy initiatives with the assistance of "analytical staff support" provided by "separate committee secretariats." Unlike a fully developed policy-committee system of the Ottawa variety, Manitoba's policy subcommittees did not have a combined policyplanning and resource-allocation role (although ERIC had a "designated spending" role). Also, the full Cabinet carried out the role of a "planning and priorities" committee, the functional equivalent of which did not exist within the Manitoba Cabinet committee structure.19 By that time, according to the 1986 consulting study, the Manitoba Treasury Board had lost sight of its traditional "management committee" role and tended to focus on "small, narrow, and detailed expenditure issues," often seen as a consequence of a fully developed policy-committee system. The role of ERIC within this central-agency framework—which was stalled somewhere between a policy committee and a traditional Treasury Board-centred approach to the management of government— was to take on "a group ministerial overview role on a range of major economic development thrusts and to ensure that individual projects proceed in a manner consistent with the government's economic policies."20 An important subset of this role, according to Laux and Molot, was responsibility for "determining policies related to the Crowncorporation sector in such areas as economic development strategy as 89

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MANITOBA Department of Crown Investments Period

ORGANIZATIONAL

CONTROL

OVERVIEW

INSTRUMENTS

legoslatjue cbinetnet

ministerer

eticc

Short-list decisions - Formation - Mandates - Investments - Corporate administrative policy Monitoring agents -ERIC

dciii

corporaterre boardsds

corporatertterr managementnetnt

-DCI

Information base - Corporate strategic plans - Corporate performance data Evaluative mode - Corporate planning process - Prospective and retrospective

Figure 3 Overview: Manitoba Crown Corporations

well as approval of budgets or re-financing proposals" of Crown corporations.21 Armed, as noted above, with a delegated expenditure function (deriving from its custodianship of the Manitoba Jobs Fund, a special appropriation set aside annually to finance long-term job creation), this Cabinet committee comprised a source of "new money" for the financing of new economic development initiatives, whether proposed by Crown corporations or government departments. But although ERIC provided a collective, ministerial decision forum for the deliberation of Crown-corporation strategic planning and investment issues, it was not set up to deal exclusively with Crown-corporation 90

Manitoba: The Vertical Information Systems Design hies. As one cttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttentral agency staffer noted: It is important to understand the context in which ERIC was established. The economy was in the sewer and the government's priority was job creation. The fundamental decision, with respect to the Crown sector, was an attempt to get at the economic and job creation potential of the Crowns, not to get at their management or investment decision making. The overall thrust, if you like, was nine parts job creation and one part management improvement. The purpose of the DCI, in the words of the minister announcing the creation of the new department, was to "develop and maintain an overview of Crown-corporation activity, direction, and future financial implications." This role he likened to "a type of Treasury Board function that can be played in the general overview manner with respect to Crown corporations."22 The Treasury Board analogy was somewhat misleading, in the sense that DCI (established by an orderin-council) had no statutory authority to handle Crown-corporation finances, or to perform any capital-resource-allocation function. It was linked to the resource-allocation function, however, by virtue of the fact that it undertook both secretarial and policy assessment duties for ERIC, provided advice to Crown corporations on plans and budgets, and analyzed Crown-corporation budgets on behalf of ERIC ministers. Other functions undertaken by DCI included the gathering and analysi of Crown-corporation performance data, and the provision of guidance to the boards of directors of Crown corporation, on which DCI staff often served as board members. In addition, DCI was responsible for the development and articulation of a comprehensive administrativepolicy framework for Manitoba Crown corporations, which was in the process of being compiled (in the form of a standard, corporate administrative-policy manual) by a private-sector consulting firm, at the time the department was folded. The Economic Resource Investment Committee together with the Department of Crown Investments was clearly an experiment in the application of conventions of collective ministerial responsibility and central-agency machinery to Manitoba Crown corporations. It was never quite clear, however, just how the new roles and responsibilities introduced by this experiment would be reconciled—in practice—with existing conventions and practices linking the Manitoba government and its Crown corporations. It was never firmly established, for 91

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example, whether the minister responsible for the DCI was responsible for any and all Crown corporations, or just DCI. Further confusion stemmed from the fact that the chairman of ERIC was not necessarily the minister responsible for the DCI (and vice versa). Moreover, neithe the chairmanship of ERIC nor the Crown Investments portfolio were linked to any other specific portfolio; whether Finance or that of the Department of Industry, Trade and Technology (ERIC'S largest constituent portfolio). Most significantly, from the standpoint of the coordination of ministerial direction to Crown corporations, there was little congruence between the membership of Cabinet's Economic Resource Investment Committee and the ministers who had been designated as individually responsible for particular Crown corporations. These oversights and confusions led to anomalies in practice. And they, in turn, contributed to tensions between the new central-agency machinery and the individual Crown corporations. The ERIC/DCI nexus, in which ERIC functioned as a collective ministerial decision forum for the deliberation of Crown corporation issues with the staff support of the Department of Crown Investments, constituted the central locus of decision within the Manitoba Crowncorporation decision-making process. A second locus of decision was contained within the relationship between the minister responsible for a Crown corporation and the board of directors of the corporation. At the individual board level, noted Laux and Molot, "the designated minister remains the prime contact with the board of directors, responsible both for communicating government policy to a Crown corporation, by at least having annual meetings with its board, and accounting to the legislature for the corporation's performance."23 Curiously enough, while Laux and Molot described the designated minister as the "prime contact" with individual corporate boards, they also noted that "ministers virtually never sit on boards." Nor did they note any ongoing interaction or reporting relationship between the designated minister and the chairman of the board. What they did note, aside from the fact that all board members and chairmen were order-in-council appointees, was that "public servants (often DCI officials) sit on all boards (not, however forming a majority)." They noted as well that it was also government policy to "appoint worker representatives to every board," a policy implemented by most Manitoba Crown corporations.24 Another feature of the board composition was a strict separation between the positions of chief executive officer and chairman of the board, a practice thought to have led to the domination of boards of directors by corporate management in earlier years. Few Crowncorporation executives served on the boards of Crown corporations, 92

Manitoba: The Vertical Information Systems Design whether as chairmen or board members. The official lore of Manitoba Crown corporations, during the period investigated, tended to sanctify the independence of Crown-corporation boards of directors from overt political or managerial influences. There is little evidence, however, to suggest that this locus of decision was regarded as a pillar of strength by Manitoba Crown-corporation decision makers. The Pawley administration, generally speaking, sought to locate the centre of gravity of the Manitoba Crown-corporation decision-making process within the central institutional framework of the government. Boards of directors of individual Crown corporations were linked to the central locus of decision by means of conventions of individual ministerial responsibility, the DCI superintended corporate-planning process, and the practice of having DCI officials serve on corporate boards. But what of the substance of decision ? What kinds of decisions did the Manitoba government prefer to hold to itself rather than delegate to corporate boards and managements? Alberta politicians, as noted earlier, purported to adhere to a strict arm's-length relationship in which "policy" decisions were located within the central decision locus and "administrative" decisions were located within individual corporate boards. Manitoba politicians, by way of contrast, downplayed the traditional arm's-length formulation and did not make much of the venerable distinction between "policy" and "administration" as it might apply to the Crown-corporation instrument. As one politician said: A minister just can't be at arm's-length from a Crown corporation. You are going to have to pay attention to some of the day-to-day activities of a Crown corporation in terms of how it deals with the public. We've had instances in our administration, and there have been instances in the past, where not only should government look at (and should have looked at) capital investment decisions, but the minister or government should look at day-to-day operating decisions.25 Manitoba politicians, during the period investigated, failed to advance any authoritative conceptual distinctions with which to demarcate clear decision categories and responsibilities between the central institutional framework of the government and individual Crown corporations. Consequently, interpretations abounded as to the kinds of decisions the government held or ought to have held to itself, and the kinds of decisions it delegated or ought to have delegated to individual corporate boards. Some Crown-corporation decision makers discerned a "short-list" of decisions firmly domiciled within the central decision 93

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locus; a list that included formation, mandates, and most investment decisions. Most, however, discerned no short-list at all, observing that "the pendulum sort of swings on these things," or "I'm not sure what it is this month because there's kind of a continuum there with a big grey area in the middle of it." If indeed a "short-list" did exist, according to such observers, it was a list of indeterminate length that was not rooted in any firm distinctions between "policy" and "administrative" content or "strategic" and "operational" decisions. As several players commented: You will not find such a thing because ministers want flexibility to be involved in whatever they want ... What they're interested in are the so-called "key issues" that pop out of the corporate plan. It is those they want to look at, and everything that follows. There is a question about whether a key issue is a strategic issue or an operational issue. We don't differentiate on that basis. They are looking at administrative controls that descend pretty far into what, in other situations, would be regarded as managerial prerogative. Ministers see investment decisions and diversifications as being fairly central matters the government should have a handle on. But they say, in the real world, the distinction between strategic decisions and operational decisions is artificial, and that sometimes administrative details are essentially the only way to get a handle on something that's really bigger. There's a tendency to look at some of these things (administrative policy) and worry that in the public's eyes the government is being seen as ... inconsistent. There has been some confusion because some people think the General Manual of Government Administration should or, in fact, does apply to Crown corporations. That's what the provincial Auditor thinks, so there is a problem in Manitoba as to what the norms should be, what rules apply to Crown corporations. Because there was little consensus as to the kinds of decisions that were, or ought to have been, located either within individual corporate boards or the central decision locus, it is difficult to arrive at a working definition of how the Manitoba government actually organized itself to provide direction to its Crown corporations. Throughout the DCI period, the debate over "substance of decision" raged. One school of thought condemned what it saw as the essential speciousness of a preoccupation with prudence and probity in the day-to-day conduct of corporate administrative affairs. Said one irate Crown-corporation executive: "That's what we're talking about as opposed to issues of 94

Manitoba: The Vertical Information Systems Design major substance—issues that have to do with the size, the shape, and the direction of Crown corporations. You don't see debates about major investment issues, where the differences are only in the billions of dollars. You see debates about club memberships or banquet policy." A second school of thought saw an emphasis on corporate administrative policy as a temporary but necessary emphasis. Proponents of this school of thought held that the government had been obliged to react to a large number of administrative problems only because "there was no comprehensive Crown corporation policy." What was needed, they argued, was a "set of administrative policies within which Crown corporations can operate; ... we can then start to focus in on the serious things in life, like capital rationing." This perspective on the substance of Crown-corporation decision-making loomed significantly in the decision perspective of at least one ministerial aide, who said: Concern with administrative policy is REALPOLITIK because these are some of the things that have gotten us in trouble over the past few years. Now, it is stupid for a central agency to be bogged down in all these details. That's why you have a board. So what's happened is that politics has interceded. There is no policy framework to prevent these things from happening and that is what is preoccupying the minds of politicians. But in the final analysis the major control over a corporation is its capital, just like in the private sector, and that will be the part that will be centrally handled. The Manitoba government, during the Pawley administration, sought to domicile decisions governing the formation, mandates, and major investment decisions of its Crown corporations within the central institutional framework of the government. But it also sought to domicile the development and articulation of a comprehensive administrative framework for Crown corporations within the central decision locus. This rudimentary model of managerial direction —if it can be called that did not incorporate any coherent differentiation of decision categories and responsibilities between the Manitoba government and its Crown corporations. It provides us, however, with a workable—although somewhat anarchistic —structural reference point with which to investigate the interactions and maximizing behaviours of the various principal actors within the Manitoba Crown-corporation decision-making process. INSTITUTIONAL DECISION CONSTRAINTS The interactions and maximizing behaviours of Manitoba politicians, bureaucrats, and corporate actors were subject to the institutional 95

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decision constraints of a troubled central-agency apparatus, one in which the division of decision-making responsibilities between the government and its Crown corporations was contentious and unclear. At the individual board level, no clear norms existed to condition interactions among the different kinds of Crown-corporation decision makers, not even for those interactions between ministers and their designated Crown-corporation boards of directors. As noted earlier, ministers rarely served as either chairmen or board members, and their interactions with corporate boards tended to be personalized and idiosyncratic. In some instances, the chairman of the board was the primary ongoing ministerial contact; in others, it was individual board members or corporate managers. What was curious, given that the government consistently downplayed the traditional arm's-length relationship, was the reticence of Manitoba politicians to serve on Crown-corporation boards. No ministerial explanations of this apparent contradiction were made available to me, although one central-agency staffer ventured that if ministers served on boards, "they could influence board decisions to the point where board members are not acting in the best interests of the company but are acting in the best interests of the government of the day." Furthermore, added that staffer: "We are looking at one of our companies whose mandate, it is felt by the board, is to be profitable. Now, the government probably thinks that is a good idea but not to the extent of cutting half the jobs in order to be profitable. So, you put ministers on the board and you'll never know what's the right commercial decision versus the right political decision." Fears that politicians might somehow undermine the vaunted independence of Manitoba Crown-corporation boards were equalled only by fears that Crown-corporation management personnel might do the same. "We have Crown corporations here," stated one central-agency official, "who have some very strong managers and in which the influence of the board is minimal. Essentially the Crown corporation is run strictly by management and the board doesn't end up doing very much except rubber-stamping." Manitoba politicians and bureaucrats were quick to point out that concerns over possible managerial domination of Crown corporation boards had a certain historical justification, with origins in the Churchill Forest Products fiasco. As one official noted: "The worst experiences were when an individual entrepreneur or manager sold Cabinet on an idea; they bought it, and let the individual run it past all reason. They were so desperate for jobs up there they put up all the money. They were dealing with crooks but even as that became more apparent there was a tremendous willingness to trust and believe." 96

Manitoba: The Vertical Information Systems Design The DCI bureaucrats, unlike their political and corporate protagonists, were not constrained by any deeply held institutional anxieties that their interactions with the Crown-corporation boards might undermine the boards' independence. Being members of most Crowncorporation boards, they could try to maximize their own policy influence at the board level—both as board members and as advocates of their own decision perspective. While some Crown-corporation boards, according to DCI officials, tended to "stand off, not get into the operations but provide criteria and targets for management," others were "actively involved and got their fingers into the operations, not just the chairmen but the other members of the board." But the "ideal" role for Crown-corporation boards—at least in the view of DCI officials—was to provide "independent advice to management," within the context of the comprehensive administrative-policy framework being developed by the department. A role most definitely not contemplated for Crown-corporation boards—not by DCI, nor by anyone else—was that of a primary decision forum in which the decision perspectives of different kinds of Crown-corporation decision makers and the public-policy and commercial objectives of Manitoba Crown corporations would be reconciled. Aside from the fact that neither Crown-corporation management personnel nor politicians interacted very much at the board level, a firm consensus —shared at least among political and bureaucratit actors—existed that Manitoba Crown corporations functioned within a unique policy environment, one dominated by the Crown-corporations' public-policy, rather than commercial, performance. As one central-agency staffer said: "My experience with the commercial Crowns is (that) if the Crown corporation is a major employer in a small town, then you've got a very tough situation. Then the government's political priority, regardless of who's the government, is to preserve jobs. They are willing to lose large amounts of money in order to protect those jobs, that is, providing that those losses do not become a province-wide issue." If this comment accurately portrays the policy environment of Crown-corporation decision making during the period investigated, it follows that the maximizing behaviours of different kinds of principal actors were constrained less by the need to make commercially successful investment decisions than the need to avoid terminally unsuccessful ones. Because the outcomes of most investment decisions, except the atrocious ones, were almost invisible within this policy environment — although minor administrative transgressions were highly visible and embarrassing—the Manitoba government articulated 97

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its ownership prerogatives within the context of a comprehensive administrative-policy framework for Crown corporations. Basic to the Manitoba government's interpretation of how so-called agency problems were affecting the management and operation of its Crown corporations was its conviction that any reconciliation of the public policy and commercial objectives of its Crown corporations should be sought within the central institutional framework of the government, rather than within the boards of directors of individual Crown corporations. This orientation was tied very closely to the application of conventions of collective ministerial responsibility to the Crown corporation instrument. As one DCI official put it: "Corporations suggest to us there is no need for the Department of Crown Investments; that the real relationship is through the chairman to the minister. They think that once they get the minister's authority to do something, that's the end of it. What they fail to realize is that the government operates as a group of ministers, and that the minister is not the decision maker. Cabinet is the decision maker." Of the interactions taking place in or around central decision forums that owed their existence to conventions of collective ministerial decision making, the ones most frequently discussed were those that took place in or around the Economic Resources Investment Committee. As noted earlier, ERIC was not exclusively dedicated to the deliberation of Crown-corporation issues. But that component of the committees's workload was critical, in the sense that it focused collective ministerial attention on the strategic plans or capital budgets, or both, of all Manitoba Crown corporations. Its work consisted, quite simply, of the review and recommendation for Cabinet approval of corporate strategic plans assembled and presented by corporate actors, using a format developed and popularized by the DCI. In the absence of a corporate strategic plan—which was sometimes the case—investment decisions were arrived at via a capital-budget review. In either event, analysis to support ERIC investment decisions was performed by DCI officials. These officials provided ERIC ministers with "assessment notes," summarizing the content of Crown-corporation investment proposals and containing staff recommendations for ministerial decision. To the extent that DCI officials performed routine staff analysis for ERIC ministers, acted as a secretariat to ERIC for the Crown-corporation component of its workload, and were present during all ERIC Crowncorporation decision making, these central-bureaucratic-monitoring agents were the beneficiaries of a collegial decision-making relationship with ERIC ministers. The ERIC/DCI nexus, however, was itself constrained by the fact that the full Cabinet did not delegate to ERIC the final authority to deal 98

Manitoba: The Vertical Information Systems Design with all Crown-corporation investment issues. It delegated only the corporate-planning process, with some discretion to indulge in resource allocation; rather than the authority to superintend any sort of rigorous Crown-corporation capital-resource-allocation process. "A capital rationing principle does not exist here," said one central-agency staffer, and "any investment decision, regardless of where it is run through, winds up on the Cabinet table" for discussion and review. "There is no mechanism and no discipline at the Cabinet level," added this official, which "forces ministers to bring issues to Cabinet through the committee system." This resulted in a continuous stream of "walkins," investment proposals brought to the altar of collective responsibility by designated ministers who stubbornly clung to the application of conventions of individual ministerial responsibility and prerogative vis-a-vis the Crown-corporation instrument. This genre of Cabinetlevel investment decision making, remarked a former ministerial aide, reduced itself to one in which the full Cabinet functioned as the de facto "board of directors" of the Crown corporation being discussed. "This," he said, "is political decision making in the best and the worst sense of that phrase. They sit around and they talk about how many dollars, how many jobs, how many votes—how all that chemistry adds up." Department of Crown Investments officials, whose own calculus was more or less restricted to discount factors, inflation rates, fiscal adjustments, and other minutiae of capital budgetary technology, were constrained by the fact that they did not have sufficient collegiality to participate in the above calculus. They did, however, have an active and directional input into the Crown-corporation decision-making process by virtue of the analytical support role they performed on behalf of ERIC ministers and the developmental role they performed in both the assembling and the review of corporate strategic plans and capital budget submissions. The DCI officials were constrained somewhat in their interaction with corporate management by both the relatively small size of the department—it never exceeded ten person-years—and its rather cryptic mandate—which read "to ensure, through effective two-way communications, that the Crown Investments Department and the Crown corporations develop and implement strategies which reflect government policies."26 Mindful of the turbulent history of the Schreyer years during which an abortive attempt to impose a strong central-agency structure on a traditional bureaucracy gave rise to "incredible confrontation" and "gave adversarial processes a very bad name,"27 DCI officials tried to be cautious in their interactions with corporate management. They wanted to be "pro-active." As one DCI official puttt 99

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"We're proponents, not critics. By proponent, I mean being pro-active, discussing requirements and working out problems beforehand. It doesn't do anybody any good to have a corporation come in with one view and then have the central agency come in with another. That doesn't solve any problems." Although the corporate-planning and capital-budgeting initiatives undertaken by the DCI were accepted, for the most part, by Crowncorporation management as an unavoidable decision constraint, the same cannot be said about the corporate administrative-policy initiatives undertaken by the department. Attempts by DCI officials to further maximize their own policy influence via the monitoring of corporate administrative practices were sternly resisted by Crowncorporation management as a massive and ill-conceived assault on their own managerial discretion and relative autonomy. On this front, the interactions between DCI monitoring agents and corporate actors were such that it was not unusual for either to refer to a "culture gap" in their relationship, or to two different "mind-sets" or "mentalities." These differences were often rendered so explicit that reconciliations could be achieved only with considerable difficulty. One senior Crowncorporation executive noted that when "these people come from the government side and don't have any real understanding of corporate issues and business issues, and are themselves subject to the constraints of the central machinery—Treasury Board, for example, or the Public Service Commission— ... these factors ... can jeopardize the relationship between these people and those who operate Crown corporations. These are two different worlds." The DCI officials, convinced that "in a government corporation you require the kind of activity which is above and beyond suspicion," argued the case for increased information gathering, monitoring and analysis. Part of DCI'S mandate, after all, stipulated that "the government of Manitoba have at its disposal information and analysis in the form it requires to be able to adequately understand and direct the activities of Crown corporations in Manitoba."28 In practice, however, any such mandate is constrained by the capacity of monitoring agents to actually collect, process, and analyze the required information. INFORMATION AND INFORMATION PROCESSING Monitoring of Crown-corporation performance during the DCI era wa based on an approach to information and information processing that placed a high priority on the generation of information taxonomies and analytic overviews. These tools were used to inform the government in its efforts not only to capture the potential of Crown corporations 100

Manitoba: The Vertical Information Systems Design as instruments of economic development, but to address the internal agency problems of Manitoba Crown corporations. As such, the DCI served as a centrally located information collection-and-processing resource for a centrally located decision point, the Economic Resources Investment Committee of the Manitoba Cabinet. The characteristic movement of information in this approach was essentially vertical in nature—from the boards and managements of individual Crown corporations to the central institutional framework of the Manitoba government. The general idea, said a former Manitoba Cabinet minister, was to have a "management information system." He added, "With a management information system, you are in a position to assess what is happening at any given time against the criteria that have been set up as targets, to monitor, and to know what is happening. If it hasn't been achieved, you ask why it hasn't been achieved and then you make some judgement calls. But if you don't have that information, then nobody knows." This approach to information and information processing carried with it a considerable information advantage for centrally located monitoring agents; that is, DCI officials and ERIC ministers. Since all Manitoba Crown corporations were required to submit corporate strategic plans and regular performance reports through DCI to ERIC, these political and bureaucratic monitoring agents had assured access to the key planning assumptions of Crown corporations and to actual Crown-corporation performance data. As such, they were in a position to calculate variances between the intended and actual performance of Crown corporations and to initiate corrective action where necessary. Corporate strategic plans, as noted earlier, were assembled by Crown corporations using a format developed and suggested by the D a corporate planning process in which DCI officials were heavily involved. The prototype corporate plan—itself a fifty-page document— suggested the inclusion of a full range of contextual variables, related to the financial strength of the corporation within the industry of which it was a part and the business environment in which it functioned. It also suggested the inclusion of an analysis of the strategic directions available to the corporation, together with the financial assumptions underlying its capital budget proposals and the details of its operating plans and budgets. Although the corporate strategic plans assembled by individual Crown corporations did not always precisely conform to the DCI format, the information transmitted to the central decision locu was usually sufficient for DCI and ERIC to arrive at an adequate understanding of key Crown-corporation planning assumptions. As one DCI staffer noted: 101

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Some people like to start at the top. Others like to start at the bottom. I don't have a problem looking at the capital budget as a tangible manifestation of what the corporation plans to do, whether they set out their objectives, (or) have a five-year corporate plan. You have the nuts and bolts there. The department (DCI) favours the top-down approach which requires the compilation of corporate strategic plans. I would say if you could only have one of the two, you would need the capital budget. But you do need both. While the DCI corporate-planning process, as noted earlier, was not based on any explicit capital-rationing principle, its information requirements were such that it effectively eliminated many of the distortions of a case-by-case approach to Crown-corporation capital budgeting formerly used by Manitoba governments. Previously, noted a DCI official, the use of unique discount factors, inflation assumptions, interestrate assumptions, and other fiscal assumptions for each investment case permitted Crown corporations "to make any set of numbers work out, simply because there was no pre-determined method of calculus." "What we want," said this official, "is as much information as we can get from the corporations in order to determine the achievement of their goals; what they say they are going to do and if, in fact, they are doing it." To facilitate such comparisons, the ERIC/DCI nexus required Crown corporations to submit monthly performance reports that contained primarily financial data and indicators but also a sprinkling of non-financial performance measures. Armed with this information, DCI officials supplied quarterly variance reports to ERIC ministers and raised specific performance issues on an ad hoc basis as they became known. In addition to supporting the retrospective evaluation of Crown-corporation performance, this assured access to corporate performance data facilitated the prospective evaluation of Crown-corporation investment proposals. Most notably, it provided central monitoring agents with a data base of their own, one that could be used to challenge or verify the information supplied by corporate actors in the course of the annual corporate-plan update or the capitalbudget review (or both). Finally, although DCI officials emphasized that this was no substitute for having hard information on the planned and actual performance of Crown corporations, DCI officials served on the boards of directors of most Manitoba Crown corporations. This practice provided not only an additional validity check on the information normally supplied by corporate actors, but also an earlywarning system to identify problems and issues not included within formal information-sharing arrangements. 102

Manitoba: The Vertical Information Systems Design To the extent that DCI officials used information taxonomies dedicated to the systematic monitoring of Crown-corporation performance within an unambiguous corporate planning and capital-resourceallocation context, it was possible for them to consolidate their information advantage and establish credibility as an ongoing alternative source of information and analysis to ERIC ministers. When they extended their information taxonomies to include corporate administrative-policy issues, however, relations with corporate actors became quite abrasive. The essential impossibility of monitoring departures from a comprehensive, yet largely hypothetical, Crown-corporation administrative-policy framework exceeded the capacity of DCI officials to collect, process, and analyze the required information. This problem detracted, in turn, from the information advantage and credibility the officials had managed to establish for themselves in the area of corporate planning and capital budgeting. Howard Pawley, while Opposition leader, often attacked the Stirling Lyon government over alleged administrative-policy transgressions on the part of Manitoba Crown corporations. Take, for example, the underwriting of memberships in the prestigious Manitoba Club by the Manitoba Public Insurance Corporation for a number of its senior executives. Pawley asked the Lyon government "whether or not the payment of such membership fees ... was in violation of the (Manitoba government) General Manual of Administration pertaining to payment of membership fees by departments and agencies?"29 Also, as noted earlier, one of the first acts of the Pawley administration entailed the premier's public tongue-lashing of Manitoba Crown corporations, the subject of which was corporate administrative policy in the area of customer relations. As headlines began to swirl during the Pawley administration over the alleged lavish lifestyles of senior ManFor executives, expense account violations by the president of the Manitoba Public Insurance Corporation, conflict of interest and criminal fraud at McKenzie Seeds, and so on, the development of an administrative policy framework to prevent such incidents and the attendant political embarrassment became a very important factor in the Pawley government's reasoning. The task of developing such a framework and the means of monitoring departures from it became the responsibility of the DCI. A draft annual report of the Department of Crown Investments for 1985-86—in fact, the first annual report prepared by the department after more than three years of existence—was replete with references to "effective two-way communications" and DCI'S role in "opening lines of communications" between the Manitoba government and its Crown corporations. This document also made reference to the establishment 103

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of a Policy Coordination and Management Services Division of the department, responsible for "providing management expertise and guidance to all Crown corporations including the design and implementation of policy guidelines, human resource management systems, and the development of administrative infrastructures to ensure compatibility with government policy and direction."30 This function of DCI, duly noted in the Manitoba government's General Manual of Administration, was described by the manual as follows: Management Services—promotes consistency of management practices and systems across Crown corporations. Strengthens communications between government and Crown corporations through the cooperative development of global management and personnel policies and information systems. Serves as a focus for external corporate sector communications and liaison between Crown corporations and the private sector.31 The DCI, in short, declared itself in the administrative-policy business as well as the corporate-planning and capital-budgeting business—a market it said it intended to serve through the art of "effective two-way communications" and "information systems" technology. As such, Manitoba Crown corporations soon became the site of routine visitations by DCI officials, or consultants retained by the departm who exhibited manifest curiosity about banquet policy, allocation of corporate vehicles, tendering procedures for the acquisition of office equipment, and other minutiae of corporate administrative policy too numerous to mention. As noted earlier, this diversification in the activities of DCI was anything but welcomed by Crown-corporation managers. Corporate actors, in fact, objected as much to the information collection and processing methodologies employed by centralbureaucratic-monitoring agents as they did to the fact that corporate administrative policy had been included within the information taxonomies of the DCI in the first place. In the words of various corporat actors: Whenever a new scandal happens, DCI comes back to all of the Crowns asking for exactly the same information they have been asking for and receiving all along. They have a significant information base but the retrieval system—to try to collate that information—is not there. When they're asked to place an interpretation on it they come back to us rather than going to their files and passing the information on up to whoever is asking for it. 104

Manitoba: The Vertical Information Systems Design We try to give them what they ask for. If it's unclear what they're asking for, we give them what we think they want. If we ask for clarifications, what it boils down to is they're trying to standardize their request for information for all of the Crowns. This can't be done. So we give them what we think they want if they haven't defined it in an unambiguous way, which isn't very often. They drive the Crowns crazy asking for information. But they don't put it into any useful form. It's an archives. They want to receive reports, not to disseminate reports which would presumably be a compilation of the ones they receive. They want to be the official repository. When a crisis strikes, then you would have to turn to them and ask, "What happened? How do we fix it?" The haphazard information-collection methods employed by DCI and its contract consultants to monitor corporate-administrative policy, and the apparent inability of these central-bureaucratic-monitoring agents to perform any useful analysis on the information thus collected, resulted in widespread scepticism among corporate actors. The attendant internal furore eventually drew the ire of Cabinet, which in late 1985 froze the person-years allocated to the department and drastically reduced its consulting-services budget. "There's a danger (that) they get more information than they can absorb," said one central-agency staffer, "that that's the end of the line for the information and it will not get distilled for the use of the politicians." If such is the case, predicted this observer, "the link in the middle will be perceived as ... the weak link." The DCI'S application of an information taxonomy, based on administrative-policy criteria, both reflected and exacerbated the essential incoherence of the division of decision-making responsibilities and the uneasy coexistence of conventions of collective and individual ministerial responsibility within the Manitoba Crown-corporation decisionmaking process. Corporate actors, most of whom viewed DCI'S experiment in "effective two-way communications" and its foray into corporate administrative policy as a whimsical intrusion on their own managerial discretion and relative autonomy, simply concluded that "if the minister is responsible, anytime you introduce people in between you're not getting communication; you're getting static on the line." The ministers responsible for individual Crown corporations, many of whom were not ERIC members, were often faced with the unpleasant task of choosing between information supplied by senior managers of the Crown corporation for which they were responsible and information supplied by central-bureaucratic-monitoring agents. 105

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This choice could go one way or the other. But judging from the number of "walk-ins" that made their way to the Cabinet table, it often favoured corporate actors. To the extent that DCI officials were excluded from this informal and lateral information-sharing relationship between corporate management and designated ministers —a practice sanctioned by conventions of individual ministerial responsibility—they were less in danger of being overwhelmed by vast quantities of information than of being in possession of no information whatsoever.

STRATEGIC BEHAVIOUR The proposition that politicians claim credit for the activities of Crown corporations when such activities are likely to have positive political returns, but distance themselves in situations where political returns are likely to be negative or zero has a graphic applicability to the Manitoba Crown-corporation decision-making process. Unlike politicians in most other Canadian jurisdictions, who are able to distance themselves from Crown corporations by invoking the traditional arm'slength relationship, Manitoba politicians rejected the arm's-length formulation. They thus deprived themselves of a conventional and convenient rationale on which to base their practice of selective responsibility. But this did not mean (although it clearly inferred) that Manitoba politicians would practise comprehensive, as opposed to selective, responsibility, or refrain from distancing themselves from Crown corporations in adverse political circumstances. What it meant was that these politicians saw Crown corporations —commercial Crown corporations, in particular—not so much as a means of taking positive action to gain new votes, but more in terms of containing political risk. In other words, they wanted to avoid blame or culpability for the misdeeds of their errant corporate charges. This approach resulted in several unorthodox innovations in the application of conventions of ministerial responsibility to Manitoba Crown corporations during the period investigated. It is plausible, for example, to interpret the lack of norms governing modes of ministerial interaction at the corporate board level—in which ministerial participation was erratic—as a surreptitious pre-distancing strategy on the part of designated ministers. What ministers appeared to be saying, said one senior Crown-corporation executive, was "I don't want to be that close. I want to be further back, because I want to be able to make decisions without having got to know this guy too well." Having established some initial distance from the instrument and its denizens, it was then easier—to take this interpretation one 106

Manitoba: The Vertical Information Systems Design step further—for ministers (exemplified by the premier, as noted above) to admonish Crown-corporation management publicly for administrative-policy transgressions or mediocre commercial performance. A minister responsible for ManFor once publicly scolded a senior Crown-corporation executive for having purchased cigarettes on a corporate charge account. On another occasion, a ManFor minister berated corporate management in the legislature for having moved, in a year of heavy financial losses, from a plain typewritten to a glossy annual report—a report he had just tabled. The basic ministerial stratagem, according to a senior DCI official who himself argued that "ministers ought not be accountable for administrative kinds of things," was to shift the blame directly onto corporate management. "They're not about to close the company down, but they make some pretty strong suggestions to the company that it has to clean up its act. They point their finger at management, suggesting the company is poorly managed." Another avenue of pre-distancing, according to a long-time observer of Crown corporations in Manitoba, reflected the fact that the province had "multiplied the number of ministers who have involvement with each Crown corporation to the point it has become blurred, in any particular decision-making situation, who had knowledge of the situation and whose views prevailed." This observation reflected some of the Pawley government's difficulties vis-a-vis the application of conventions of collective ministerial responsibility to the Crowncorporation instrument. The confusion of having a minister responsible for the DCI (theoretically, all Crown corporations) was resolved, to a certain extent, by restricting the role of the DCI minister in the legislature to delivering an annual "state of the Crowns" address during the Committee of Supply debates on the estimates of the department. Otherwise, for the most part, it was up to the designated ministers to respond to questions about the Crown corporations for which they had been assigned responsibility. But not always. A persistent source of confusion stemmed from a tradition established during the Schreyer years, in which the minister responsible for the Manitoba Development Corporation had lead responsibility for all commercial Crown corporations whose equity was held by MDC. This tradition led Manitoba journalists to use the term "the minister most responsible" to differentiate between "de facto" and "official" modes of ministerial responsibility; a differentiation the Pawley government admittedly employed from time to time apropos some of its commercial Crown corporations.32 Also, the Opposition and the media asked whether a minister, if he or she was not a 107

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designated minister for a Crown corporation but happened to be a member of ERIC, did not exercise any ministerial prerogative whatsoever? This question was raised during the McKenzie Seed conflict-ofinterest incident. The designated minister, who represented the riding in which the firm was located, acted as the "de facto," rather than the "official," minister responsible during the early phases of the incident. Opposition spokesmen feared the minister would continue to occupy this capacity—as an ERIC member—after having resigned from the McKenzie portfolio following several months of accusations, counter-accusations, auditors' reports, executive firings, and criminal investigations. The innovation of "pre-distancing," an inefficient variant of selective responsibility that meant that politicians simply shifted the blame for untoward events directly onto corporate actors, resulted in the instant evaporation of any constitutional niceties residual to the truncated arm's-length relationship between the government and its Crown corporations. Characteristically, as was the case with conflict-ofinterest charges against senior executives of the Manitoba Public Insurance Corporation and McKenzie Seeds, the minister responsible for the corporation requested (through Cabinet) that the Provincial Auditor conduct a "special audit" of the circumstances surrounding the allegation. If, as had been the case in both of these incidents, corporate management had strayed too far from the Manitoba government's General Manual of Administration and were implicated for "poor managerial judgment," they were immediately fired if a resignation was not forthcoming. Sometimes, as was the case in the McKenzie incident, that was followed by criminal proceedings. The designated minister and the government could then congratulate themselves for taking decisive action, while absolving themselves of any responsibility whatsoever for the administrative circumstances under which the transgressions had occurred. The most vivid example of this genre of ministerial behaviour can be found in the case of MTX Telecom Services, a commercial subsidiary of the Manitoba Telephone System (MTS) that lost over $27 million amid accusations of everything from sloppy bookkeeping to downright corruption in its abortive Saudi Arabian business misadventures. Confronted with a sworn affidavit detailing alleged, questionable management practices by MTX, the government initiated an RCMP investigation of the criminal allegations and commissioned a major consulting firm to investigate non-criminal aspects of the case. The consulting study, which concluded that "senior executives responsible for MTS and MTX must accept ultimate responsibility for exposing the corporation to significant business risks and financial losses,"33 amounted to little 108

Manitoba: The Vertical Information Systems Design more than a (six-volume, 400-page) monument to the practice of selective responsibility in Manitoba. The consulting firm had no mandate to investigate the responsibility of the minister designated as responsible for MTS/MTX or the government, only the responsibility of corporate management. As one Winnipeg journalist observed, the terms of reference of the study included "the quality of information provided to the government, but not the adequacy of the government's response to it."34 The government's response to the consulting study report, moreover, revealed the bedrock thinking of the Pawley administration regarding the applicability of conventions of ministerial responsibility to the Crown-corporation instrument. The study, the premier asserted, "gives no indication of culpability on the part of any elected officials in this matter." And the minister responsible for MTS, while he announced his own pending tttttttttttttttttttttttttttttttttttttttttttttttttttttttttrrrrrtttttttttttttttttttttttttttttttttttttt of MTS and MTX executives), praised his own "quick and decisive course of action" in the affair. 35 The Winnipeg Free Press, not impressed by the government's handling of the incident, editorialized: "There is nothing in the finest parliamentary tradition which permits a minister to cling to office on the grounds that no one has found him "culpable." In the finest parliamentary tradition the operative word is not "culpable" but "responsible." A minister is responsible for the department he heads. If it goes badly off the rails he should accept the responsibility and resign from the Cabinet."36 If Manitoba politicians, during the period investigated, experienced difficulties in successfully practising the distancing component of selective responsibility, they found it every bit as difficult to claim credit for the positive achievements of their commercial Crown corporations. That was mainly because — scandals aside—the commercial performance of these corporations tended to be mediocre, if not downright disastrous. On the rare occasion when one of these companies actually reported a profit, Manitoba politicians would do battle with each other to claim credit for having wrought "remarkable turnarounds."37 But this opportunity did not present itself very often. More characteristically, the term "Crown corporation" was rarely uttered by Manitoba politicians without considerable reference to the publicpolicy objectives of the instrument, especially job creation. Nevertheless, because, as noted earlier, the commercial performance of these companies was not seen to be as important as their public-policy performance, the maximizing behaviours of political and corporate actors were constrained —not so much by the need to make commercially successful investment decisions as to avoid disastrous ones. Barring financial catastrophe, corporate actors could seek to maximize 109

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their own managerial discretion and relative autonomy with very little reference to the commercial performance of the company. This arrangement was acceptable to Manitoba's politicians as long as they could claim credit for the non-commercial (public-policy) performance of the company. As one central-agency staffer noted: The most natural exchange is between Crown-corporation management and politicians, particularly in the visible and small commercial Crowns, because management wants as much equity financing as it can get out of the government and local politicians want it to succeed. There is a tremendous willingness "to go that extra round" because this might be the strategic investment decision that actually works out. And it turns out ... you can always find someone reputable to recommend the next investment; I mean, that's where corporate management may have an edge. Governments are susceptible to that. Coming to regret their own susceptibility within such open-ended exchange relationships with corporate actors, Manitoba politicians became convinced of the intrinsic merits of centrally generated analytical overviews of Crown-corporation activities and financial requirements. The upshot of this, as noted earlier, was the establishment of an exclusive exchange-relationship with central-bureaucratic-monitoring agents (DCI officials). The latter supplied ERIC ministers with the information they required to perform their collective Crowncorporation decision making, in exchange for a relatively unconstrained opportunity to maximize their own policy influence within the Manitoba Crown-corporation decision-making process. This arrangement was acceptable to most Manitoba politicians, because it had a certain potential to preclude any political embarrassment resulting from corporate investment miscalculations. Also, the logic of having a comprehensive Crown-corporation administrative-policy framework in place was quite compatible with the preference of Manitoba politicians to obfuscate their own responsibility for the "administrative kinds of things" taking place in and around Manitoba Crown corporations. But, as noted earlier, this arrangement was less acceptable to certain other Manitoba politicians; that is, to ministers responsible for individual Crown corporations who were not ERIC ministers and preferred a more direct and traditional relationship with corporate actors. Because their traditional information advantage had been largely appropriated by central-bureaucratic-monitoring agents who served a select group of political monitoring agents, the ability of Crowncorporation management personnel to enter into exclusive exchange 110

Manitoba: The Vertical Information Systems Design relationships with political actors, thus maximizing their own managerial discretion and relative autonomy, was severely constrained. Clearly lacking the requisite discretion and autonomy .to make their own investment decisions—or even to force trade-offs between commercial and public-policy objectives—they had little alternative but to indulge in a grim variant of selective rationality. Indeed, they had but one way of maximizing whatever residual managerial discretion and relative autonomy might still be available to them: they could enter into ad hoc exchange relationships with individually designated ministers who felt similarly aggrandized by the application of conventions of collective ministerial responsibility to the Crown-corporation instrument. A "good one-on-one relationship" with a designated minister, said one senior Crown-corporation executive, could sometimes occur "almost despite the framework." Individual ministers, added another Crown-corporation manager, anticipated that both the public and the media would invariably blame the minister for any problems; they realized they had "a choice": to place their reliance on "the corporation and its management, or on a policy manual this thick." These Crown-corporation executives, some of whom had a bureaucratic background, likened the role of a Crown-corporation chief executive officer (CEO) to that of a deputy minister and championed the cause of traditional conventions of individual ministerial responsibility and prerogative for Crown corporations as for government departments. If, argued one Crown-corporation manager, ministers are interested in the "avoidance of surprises" that will put them at a political disadvantage and the "knowledge of things that are useful in their political grabbag," it would be to their advantage to negotiate some sort of "understanding" with senior corporate management; such knowledge, he added, would never be forthcoming from a central agency. "You have to sit down and negotiate with the minister what his expectations are." What Crown-corporation management expected out of such an understanding, of course, was the opportunity to seek a restoration of their own managerial discretion and relative autonomy which, to their way of thinking, had been seriously eroded by central-bureaucraticmonitoring agents. This sort of exchange relationship, while defended by corporate management as a natural extension of conventions of individual ministerial responsibility, was denounced by central-bureaucraticmonitoring agents as a clandestine form of strategic behaviour. "What's a problem for us," said one DCI official, "is corporate management saying, 'well, we've got our own minister. He's decided on this, so what's the big deal? Go away!'" But said this official, such behaviour 111

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is "futile in the long run" because "you'll eventually get caught. When you do get caught, you'll suffer for it. You'll pay. Most people realize that. There's no room for gamesmanship. And its not because Crown Investments has a big stick. It's because nobody likes gamesmanship. The ministers hate it more than anybody else and they won't stand for it." Such exhortations, of course, did not take into account either the frequency or the success rate of "walk-in" submissions to Cabinet, the continuous practice of which led one Treasury Board staffer to speculate "if Crown-corporation management can persuade the minister and the Cabinet of their case, then that's the decision. The rest, in the middle, is mostly a lot of process without very much substance." But this did not mean that Crown-corporation management personnel did not devote considerable attention to gaining an understanding of these bureaucratic processes and how to turn them to their own advantage. "The chief executive officer has to instinctively identify where there are potential alliances," stated one chief executive officer; "some background briefing with the Department of Finance, getting their agreement on how a project might be phased in, determining cashflow requirements in advance, will help to smooth the path." Similarly, he added: "Industry, Trade and Technology is a very powerful ministry and if you're doing something that's going to impact (on) the economy and create jobs, you will want to send a flag over there because they could be a real ally. ITT influence is very high at ERIC, whereas Crown Investments, really, that's just a repository of information." It was possible, during the period investigated, for Crown-corporation managers—at least a minority of them—to circumvent many of the decision constraints imposed on them by the ERIC/DCI nexus. The MTS/MTX consulting report noted, for example, that MTS "withdrew" and was "exempted from" the DCI corporate planning exercise and that the Crown Investments' representative was "removed" from the MTS board of directors.38 This type of strategic behaviour was occasionally taken to an extreme, the MTS/MTX affair being a case in point. It was not, however, the only kind of strategic behaviour employed by Crown-corporation management. One newly appointed Crowncorporation CEO, formerly a DCI official, began his tenure by announcing a wave of expense-account investigations, vowing to "put a policy in place" to guard against "nepotism" within the corporation. "We've got very little policy guidelines," he stated, "but that'll change soon."39 The problem with this sort of behaviour, remarked a political aide, was that "the line 'we've got your interests at heart; we're sensitive to your political requirements'" could be taken by Crowncorporation managers "to the point where they are sensitive to political 112

Manitoba: The Vertical Information Systems Design requirements that don't exist. They can go overboard on these things." The first type of strategic behaviour attested to weaknesses in the capacity of the Pawley government's Crown-corporation organization design to constrain the maximizing behaviours of corporate actors; the second attested to the very pervasiveness of the constraints it sought to impose. In fact, these two kinds of strategic behaviour were divergent responses to the constraints imposed by the design. Some corporate actors opted for insurgency, while others opted for ultracompliance. Undoubtedly, the insurgency of a minority of corporate actors contributed to tensions within the Manitoba Crown-corporation decision-making process, as well as to the political woes of the Pawley administration. As for ultra-compliance, how much of the MPIC executives' attention span was consumed by minutiae such as corporate expense accounts, when it might otherwise have been devoted to precluding the massive increase in automobile insurance premiums the Pawley government had had the misfortune to propose during the twilight of its tenure ? ORGANIZATION DESIGN The information-processing and decision-making practices by which Crown corporations were linked to the Manitoba government, when interpreted from the standpoint of alternative Crown-corporation organization designs theoretically available to structure the government/Crown-corporation decision-making relationship, most closely approximated the vertical information systems Crown-corporation organization design. Because Manitoba practice incorporated no coherent structural differentiation of decision categories and responsibilities between the government and its Crown corporations, an indeterminate list of decisions was located within the central institutional framework of the government. Such a practice confirmed, for the most part, the emphasis on institutional control of Crown-corporation decision making predicted by the vertical information systems Crowncorporation organization design. Also, because the information collection and processing that supported the Manitoba Crown-corporation decision-making process was concentrated within the central institutional framework of the government—as opposed to the individual Crown-corporation boards—Manitoba practice conformed to the solution of emphasizing a central decision point, so as to exploit global information, as predicted by the vertical information systems Crowncorporation organization design. Information-processing and decision-making practices within the Manitoba Crown-corporation decision-making process, as predicted by 113

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the vertical-information-systems Crown-corporation organization design, resulted in a considerable information advantage for those directly responsible for managing the central information collectionand-processing resource. This distribution of information advantage was most useful for the central-bureaucratic-monitoring agents' maximization of their own policy influence within the Crown-corporation decision-making process, and least advantageous to the corporate actors' maximization of their own managerial discretion and relative autonomy. One consequence of Manitoba's vertical-information-systems Crown-corporation organization design was that it resulted, at least for a time, in a greater amount of institutional control than corporate autonomy. Some of its other consequences are discussed in chapter 6.

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Chapter Five Saskatchewan: The Lateral Relations Design In Saskatchewan, information-processing and decision-making practices linking Crown corporations to the Saskatchewan government evolved within a "holding-company" approach to the organization and direction of these corporations. A central Crown corporation—first the Government Finance Office (GFO) (1947-78), then the Crown Investments Corporation (cic) (1978-83), later the Crown Management Board (CMB) — served as the government's "corporate head office" for its Crown corporations. Practices associated with this instrument, like the stature of the holding company itself, varied somewhat with the political philosophy of the government in power, particularly, in terms of how the politicians viewed the purposes of government and the role of Crown corporations within it. But the holding-company approach proved to be quite durable over a period of more than forty years. It survived a procession of provincial governments, whose differences in philosophical outlook and intent can best be described as "infrequently evident between modern parties and administrations."1 One consequence of the long-standing and unresolved public debate on the merits of Crown corporations in Saskatchewan, in which NDP politicians often sanctified the instrument while non-NDP politicians vilified it, is that these two groups of politicians tended to dichotomize the public policy and commercial purposes of the instrument. It has been customary for NDP politicians in this province to emphasize the public-policy objectives of Crown corporations and non-NDP politicians to emphasize the commercial objectives of the instrument; these are disparate emphases which, in fact, constitute the traditional rhetorical preserves of these two Saskatchewan political tribes. Such dichotomization, however, does not clearly explain how Saskatchewan politicians actually justified their use of the Crowncorporation instrument while in power. In the late 1970s and early

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1980s, for example, the Allen Blakeney NDP government emphasized the commercial successes of the Crown corporations it established in the resource sector during times of economic prosperity; that is, during a resource boom. But the Grant Devine Progressive Conservative government, afflicted by a prolonged slump in resource commodity prices, tended—during its first term in office—to justify the continued existence of these Crown corporations in terms of their public-policy objectives; specifically, job creation. To penetrate this incongruity— and, in so doing, gain some insight into the longevity of the holdingcompany approach—we need to understand what accounted for the capacity of this approach to reconcile the public-policy and commercial objectives of Saskatchewan Crown corporations. The holding-company instrument, after all, served very different kinds of governments under very different kinds of economic circumstances. Saskatchewan's first commercial Crown corporations, introduced during the early years of the T.C. Douglas/W.S. Lloyd Cooperative Commonwealth Federation (CCF) government (1944-64), consisted of a group of small-scale, secondary manufacturing enterprises: a brick manufacturing plant; a shoe factory and tannery; a wool-processing plant; a box factory; and several types of marketing-board initiatives in the fishery, forestry, and fur-marketing industries. Such initiatives, although they reflected the government's positive view of the Crown corporation as an instrument of public policy, did not take into account the economies of scale in production. Because of this, according to Richards and Pratt, the "CCF government found itself encumbered with a number of publicly owned manufacturing concerns, most of them registering embarrassing financial losses."2 This was occurring, moreover, when the province was still reeling from near bankruptcy, the legacy of the seed grain crises of the 1930s. Wishing to avoid such embarrassments in the future —and, financially, unable to afford them — the government set up an entity known as the Government Finance Office to impose some financial discipline on these ventures. As a holding company for other provincial Crown corporations, its functions were to hold the various corporations' equity; receive their profits; approve their investment proposals; negotiate borrowing requirements on their behalf; and offer them a range of secretarial, accounting, legal, and industrial-relations support services. The establishment of this holding-company apparatus effectively removed most of the coordination of Crown-corporation financial procedures from the conventional administrative infrastructure of the Saskatchewan government (that is, the provincial Treasury). Moreover, it resulted in the firm application of conventions of collective and individual ministerial responsibility to the Crown-corporation 116

Saskatchewan: The Lateral Relations Design instrument. The same Cabinet ministers served not only as chairmen of the boards of individual Crown corporations but also as members of the board of directors of the Government Finance Office. The holding company's board of directors was a Cabinet committee devoted exclusively to the deliberation of Crown-corporation issues and decisions; its staff was the corporate equivalent of a central-agency analytical and support staff. Because the Douglas/Lloyd government had decided to de-emphasize that component of its political agenda that called for public control of the province's economic development, the GFO functioned less as an activist "corporate head office," from which to launch new government enterprise initiatives, than as an instrument of bureaucratic consolidation. But the institutional infrastructure of Saskatchewan's holding-company approach was essentially in place. Over the next forty years, it was never really to change. The GFO came close to being abolished, however, during the W. Ross Thatcher Liberal administration (1964-71), a period in which Crown corporations lost favour as policy instruments and the role of the holding company declined. Although neither the size nor shape of the Crown-corporation sector was significantly altered during the Thatcher years (three companies were sold or disbanded and three were added), distinct changes in emphasis were made concerning how the government could use the holding company to provide direction to other Crown corporations. Premier Thatcher, convinced that an economic depression rivalling that of the 1930s could be forestalled only by means of an autocratic, parsimonious management style, neither believed in Cabinet committees nor used them extensively.3 Although he chaired the board of the GFO, he did not oblige his ministerial colleagues—who continued the tradition of chairing individual Crown-corporation boards—to participate actively in the decisions and activities of the holding company. In a draft memorandum dated 24 June 1969, Premier Thatcher advised these designated ministers that "the employees of the Government Finance Office (GFO) are joining the staff of the provincial Treasurer and GFO will shortly cease to exist as a separate organization."4 The holding company was not actually abolished, however. It continued to exist on paper (possibly for legal reasons), while entering into a subordinate staffing and administrative relationship with the provincial Treasury for the duration of the Thatcher years. In 1971, with the election of an NDP government led by Allen Blakeney, the government/Crown-corporation decision-making relationship re-emerged as a major issue. But the restoration of the holdingcompany apparatus was overshadowed somewhat, until well into the second term of the Blakeney administration, by the formation of 117

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several, new, commercial Crown corporations directed toward the public development and control of Saskatchewan's non-renewable resource commodities. Between 1973 and 1975, the government established three new Crown corporations that came to epitomize the Blakeney administrations's marriage of government enterprise and economic resource development: the Saskatchewan Oil and Gas Corporation (SaskOil), an oil and gas exploration and development company ; the Saskatchewan Mining and Development Corporation (SMDC), set up to undertake joint ventures with the private sector in uranium and hard-rock mining; and the Potash Corporation of Saskatchewan (PCS), set up to acquire, develop, and operate potash mines on behalf of the Saskatchewan government. These initiatives, which in the case of oil and potash were not implemented without considerable litigation and controversy, corresponded to a period in which opEC-induced oil prices, buoyant uranium futures, and potash demands linked to world food needs resulted in excellent world markets for Saskatchewan resource commodities and—at least, for a while—a healthy Saskatchewan Treasury. During the period in which the resource corporations were established and underwent their initial development, these corporations received their policy direction not from the GFO but from ad hoc Cabinet committees. These committees were supported in their deliberations by ad hoc policy secretariats composed, for the most part, of Finance and Executive Council staff, many of whom later joined the ranks of corporate management, either within individual Crown corporations or the new "corporate head office" that was beginning to take shape during the mid-1970s. It was "the very magnitude of the emerging Crown corporation sector," noted Gordon W. MacLean in Public Enterprise in Saskatchewan, which "determined the need for a strong financial holding company"; one with the "capability of evaluating the capital requirements of all the Crown corporations and, if necessary, rationing capital in accord with the province's overall borrowing capacity."5 In mid-1978, with the passage of the Crown Corporations Act (1978), the GFO was renamed the Crown Investments Corporation and emerged, said MacLean, as "a significant structure within the Saskatchewan system, relating to the seventeen commercial corporations, with emphasis on capital considerations."6 The GFO had coordinated financial relationships between the government and its Crown corporations but had consummated, itself, few direct financial transactions. In the cic, by way of contrast, all critical financial affairs were concentrated within the holding company and, most significantly, the actual cash-flows in, out, and among the commercial Crown corporations. The cic's new mandate included 118

Saskatchewan: The Lateral Relations Design increased borrowing powers, the power to calculate and extract dividends from individual Crown corporations, and the exclusive power to assess, priorize, and approve Crown-corporation investment proposals. With what amounted to a short-term banking function—provider of equity advances, short-term corporate financing, and shortterm investment-handling facilities—the cic was essentially empowered to operate as a full-service, Crown-corporation financing centre. It soon began to occupy a key profile within Saskatchewan's Crowncorporation decision-making process and quite a considerable profile within the Saskatchewan economy as well. Buoyed, during the remainder of the Blakeney administration, by favourable economic conditions and strong world demand for Saskatchewan resource commodities, the Crown Investment Corporation (corporate group), by 1982, ranked fourteenth in the list of Canada's top 500 companies compiled by the Financial Post. It was the province's largest employer (larger than the Saskatchewan public service) and (by assets) the sixth largest Crown corporation in Canada. Not only did its assets equal close to one-third of Saskatchewan's gross domestic product, but the cic accounted for more than one-quarter of total public and private investment in the province.7 Grant Devine's opposition Progressive Conservatives, unimpressed with the cic and the new resource corporations, promised during the 1982 provincial election to "open the books" on Saskatchewan's Crown corporations. In mid-1982, shortly after its stunning election victory, the Devine government followed up on this promise by establishing a Crown Investments Review Commission (the Wolff Commission) to study the objectives, administrative structure, and financial arrangements of provincial Crown corporations. Interpreting "administrative structure" to mean the "relationships among the Crown corporations and the government," the Commission criticized the cic's "relatively heavy emphasis on political control mechanisms at the expense of corporate autonomy." In this administrative environment, argued the Commission, "the commercial aspects of some corporations, notably the cic corporations, are somewhat underemphasized." Boards of directors, noted the Commission, were "subject to political influence from several sources: from the chairmen, who are Cabinet ministers; from the cic board (members), who are sitting as a Cabinet committee; and from the cic management personnel appointed to the boards." In short, opined the Commission, "No Crown corporation escapes intensive and continuous political guidance." This concern led the Commission to recommend that "Cabinet ministers continue to be responsible to the Legislative Assembly for particular Crown corporations, but not serve as directors or officers of Crown corporations." 119

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Also, on the topic of board membership, the Commission recommended that "directors, including chairmen of commercial Crown corporations, be selected only from qualified members of the general public other than MLAS or government employees."8 The government, in June 1983, responded to the findings of the Wolff Commission by announcing a "new operating structure" for Saskatchewan Crown corporations, one that would establish "appropriate administrative and reporting relationships" to allow Crown corporations to function "more autonomously and competitively in the business environment."9 Declaring that the cic would henceforth be known as the Crown Management Board, the government noted that the CMB would continue to function as a holding company. However, while the CMB would coordinate the activities and investments of Saskatchewan Crown corporations by "providing general advice on policy matters," its operating style would be more closely modeled upon what the government saw to be the traditional (private-sector) holding-company roles of "strategy, compliance, and support." To allow for "more autonomy," said the announcement, "full-time chairmen of Crown corporations will be selected from outside ministerial ranks by Cabinet and the Crown Management Board." Straying somewhat from the recommendations of the Wolff Commission, however, the government decided that "ministers responsible to the Legislature for specific Crown corporations will act as vice-chairmen" (of Crown-corporation boards), as well as members of the CMB board of directors. Thus, although the government planned to modify its application of conventions of collective and individual ministerial responsibility to the Crown-corporation instrument, it dispensed with neither. The Devine government, during its first term of office, was quiescent regarding the altering of the size or shape of the Saskatchewan Crown-corporation sector. It disbanded two Crown corporations—the Saskatchewan Fur Marketing Service, and the Saskatchewan Educational Media Corporation—and privatized or partially privatized two others: the Prince Albert Pulp Company Ltd. (Papco), sold to a privatesector forestry resources company; and SaskOil, 40 per cent of which was sold in a public share offering to Canadian investors (a process referred to by the government as "public participation").10 At the same time, the government established five new Crown corporations: the Advanced Technology Training Centre; the New Careers Corporation; the Property Management Corporation; the Saskatchewan Water Corporation ; and the Souris Valley Development Authority. Initially, the government focused its attention on managerial issues. It dismissed a number of high-ranking Crown-corporation executives, 120

Saskatchewan: The Lateral Relations Design including the chief executive officers of the Crown Investments Corporation, the Potash Corporation of Saskatchewan, SaskOil, Saskatchewan Government Insurance, and the Saskatchewan Power Corporation (most of whom had been recruited from the Saskatchewan bureaucracy during the Blakeney years). Plagued, during much of its first term in office by unfavourable economic conditions and sagging world markets for Saskatchewan resource commodities, the Devine government concentrated less on ambitious reinvestment or privatization strategies than on organizational issues and the restructuring of the government/ Crown-corporation decision-making relationship. This was not as true of its second term of office, in which "public participation" briefly flourished. But we are primarily interested in the organizational initiatives of the Devine administration—studied in counterpoint to those that prevailed during the Blakeney administration. We begin by comparing how these two governments organized themselves to provide direction to Saskatchewan Crown corporations using the holdingcompany instrument; the differences in emphasis as to where decisions were made; as well as the actual kinds of decisions made. ORGANIZATION AND DIRECTION Cabinet, of course, was the ultimate Crown-corporation decision maker, the ratifier of decisions referred to it by the holding-company board. But the influence of Cabinet and the actual source of direction within the Saskatchewan Crown corporation decision-making process stemmed from the particular blending of conventions of collective and individual ministerial responsibility applied to the Crown corporations by the government of the day. As Laux and Molot noted, "Government priorities are transmitted to Crown corporations either directly by ministers or through the Crown Management Board."" They were not, these authors might have added, transmitted to Crown corporations by anyone else, whether other cabinet committees, the conventional central-agency apparatus, nor, least of all, conventional departmental bureaucracies. Because of the mandate's exclusivity in imparting explicit direction to Crown corporations, it would not be incorrect to describe the Saskatchewan Crown-corporation decision-making process as essentially self-contained; self-contained, that is, from the conventional, central institutional framework of the Saskatchewan government. Any corporate autonomy that inhered in this approach to the organization and direction of Crown corporations, however, was subject to whatever degree of institutional control the Cabinet chose to impose 121

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SASKATCHEWAN CIC/CMB Holding Company Configuration ORGANIZATIONAL OVERVIEW

Legislature Cabinet

Ministerttttttt Holding ompanyttttt Board

Integrating Roles

Corporate Boards

Corporate Management

CONTROL INSTRUMENTS

Short-list decisions - Formation - Mandates - Investments - Industrial relations, legal and personnel policy* Monitoring agents - Holding company - Integrating roles Information base - Corporate strategic plans** - Integrating roles Evaluative mode - Capital-rationing principle - Prospective *cic era only ** CMB era only

Figure 4 Overview: Saskatehewan Crown Corporations

through the holding-company mechanism. This unconventional institutional linkage between the government and its Crown corporations bore—at least notionally—a strong resemblance to the decision-making relationship between a private-sector corporate head office and its divisional subsidiaries, a resemblance that Saskatchewan Crowncorporation decision makers never tired of elaborating upon. Because of the Saskatchewan government's sharing of the corporate form of organization with its Crown corporations, explanations offered by Crown-corporation decision makers as to the locus and substance of their decisions owed more to theories and models developed to explain 122

Saskatchewan: The Lateral Relations Design organizational structures and decision making in private-sector corporations than to theories and models of public-policy decision making. Wishing to have a Crown-corporation decision-making process in which the decisions of individual corporate boards would be tightly linked to" those of the board of directors of the holding company, different Saskatchewan governments established different kinds of organizational devices (integrating roles) that located certain kinds of principal actors in, or around, both levels of decision making. These integrating roles, which had the effect of horizontalizing Crowncorporation decision making, served as a critical adjunct to the core model of managerial direction preferred, for the most part, by both the Devine and Blakeney governments. The board of directors of the holding company, in both the Devine and Blakeney governments, constituted the central locus of Crowncorporation decision-making. During the Blakeney years that locus consisted exclusively of Cabinet ministers, with the exception of the chief executive officer of the holding company, the managing director. These cabinet ministers also served as chairmen of individual Crowncorporation boards. During the Devine administration, the holdingcompany board consisted of Cabinet ministers, who doubled as vicechairmen of individual Crown-corporation boards, as well as nongovernmental board members, some of whom were also chairmen of individual Crown-corporation boards. Cabinet ministers, by virtue of being members of the board of directors of the holding company —a Cabinet committee—as well as vice-chairmen of individual corporate boards, continued to be linked to the Crown-corporation instrument by conventions of collective and individual ministerial responsibility. Some (but not all) of the so-called "civilian" board chairmen—in an arrangement unique within Canadian jurisdictions—also served as members of a Cabinet committee (the holding-company board) that had exclusive jurisdiction over Crown-corporation issues. The Devine government's Crown Management Board was always headed by a "civilian" board chairman—not a ministerial chairman—although one minister briefly served as "acting" chairman and the Minister of Finance assumed this role during the final months of the government's second term.12 These changes in the formula determining the composition of the holding-company board had little effect on the basic functions performed by the holding company. In addition to acting as the "corporate head office" for Saskatchewan Crown corporations, the holding company continued to act as a "portfolio manager" for government holdings in a variety of Saskatchewan enterprises; for its 20 per cent interest in Interprovincial Steel and Pipe Corp. Ltd., for example, and its 16 per 123

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cent interest in Agra Industries (two of the province's largest private corporations). It also retained a broader economic-development function which, for some reason, was never very well articulated by either the Blakeney or Devine government.13 Although the basic functions of the holding company were not altered as a result of the change in government, its internal organization and workload underwent considerable change. The Crown Investments Corporation, prior to 1982, consisted of several divisions and departments. These included: a Finance Division containing capital budget and comptroller departments; a Corporate Services Division that supplied corporate secretaries for Crown-corporation boards; a Corporate Resources Division that consisted of staff seconded to individual Crown corporations on an ad hoc basis; a Legal Division; and a Management Resources Division that contained industrial relations and public affairs departments.14 Acting on the recommendations of its Wolff Commission Report, the Devine government moved quickly to scale down the operations of the holding company to more closely approximate what the government saw as the functions of a privatesector holding company. The first function eliminated, as recommended by the Wolff Commission, was the practice of having holding-company staff serve on the boards of individual Crown corporations. This step spelled the demise of the Corporate Services and Corporate Resources divisions. Also to go were the functions performed by the legal and management resources divisions. The Devine administration focused on the functions performed by the Finance Division, elaborating upon them quite significantly during the early years of that administration's first term in office. They concentrated on the analysis of both corporate strategic plans (a CMB innovation) and Crown-corporation capital budgets (the traditional focus of analysis). The early days of the CMB also saw efforts to improve its capacity to monitor the performance of Crown corporations relative to established performance measures and to calculate routinely the opportunity costs to Crown corporations of the public-policy component of their activities. But these efforts foundered. Later on, in the first term of the Devine government, holdingcompany staff were involved in many special projects directed toward privatization and divestment, such as the sale of the Prince Albert pulp mill and the partial privatization of SaskOil. But this function, oddly enough, was never concentrated within the holding company. For a time, when the Devine government decided to become more serious about its privatization agenda, during the mid-point of its second term, all these divestment activities were initiated by a government department called the Department of Public Participation. 124

Saskatchewan: The Lateral Relations Design The holding company continued to focus almost exclusively on the management of existing Crown corporations, and on portfolio management in the case of Crown corporations that had been partially privatized. The portfolio-management function came to assume an even greater prominence as the Devine government proceeded to convert some of its Crown corporations into "mixed enterprises." A second locus of decision, of course, was contained within the relationship between the minister individually responsible for a Crown corporation and the board of directors of that corporation. In Saskatchewan, unlike many other Canadian jurisdictions, this relationship did not vary significantly from corporation to corporation. In fact, during any particular administration, the linkage between the designated minister and the board of directors was relatively stable and predictable. Prior to 1982, as noted earlier, the designated minister served as the chairman of the board of the Crown corporation for which he was responsible and was referred to as the "minister in charge." The Devine government replaced this tradition: designated ministers began serving as vice-chairmen of Crown-corporation boards chaired by non-governmental board members, popularly known within the Saskatchewan Crown-corporation decision-making process as "civilian" chairmen. Prior to 1982 as well, board secretaries and some board members had been employees of the holding company. Although the Blakeney government had defended this practice as a measure to "strengthen" boards of directors, the Devine government discontinued it in the name of increasing the "independence" of Crown-corporation boards. Similarly, the Devine government discontinued the practice of civil servants serving on Crown-corporation boards. This latter practice, although not infrequent during the early years of the Blakeney government, became less prevalent with the consolidation of such arrangements within the holding company. Finally, although the Wolff Commission recommended that chief executive officers of Crown corporations serve as ex-officio board members, the Devine government did not adopt such a practice. Boards were composed, for the most part, of "civilian" order-in-council appointees, mostly Saskatchewan businessmen. The most prominent of these appointees—the civilian board chairmen — were "civilians" in the sense that they were neither elected politicians or government employees. They were "non-civilians," however, in the sense that they were personally appointed by the premier, had a substantive history of involvement in the affairs of the party in power, and were generally thought to be politically influential individuals. The Devine government, convinced that the Blakeney government had located the centre of gravity of the Crown-corporation decision 125

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making too much within the confines of the holding company, sought to locate it more closely within the boards of directors of individual Crown corporations. This generalization, however, is not eloquent concerning the actual substance of decision: the kinds of decisions these two governments held to themselves within the holding company ; and the kinds of decisions they delegated to individual Crowncorporation boards. Unlike their counterparts in Alberta or Manitoba, Saskatchewan politicians did not approach this question in terms of the nature of the arm's-length relationship or the conceptual distinctions between "policy" and "administration." They were more likely, especially during the Blakeney years, to discuss the intricacies of the holding-company instrument itself, referring to Saskatchewan's publicsector "conglomerate." Premier Blakeney, for one, did not place any great stock in the conceptual distinctions between "policy" and "administration" as they might apply to the Crown-corporation instrument. He stated: I am inclined to (the) view that much of our preoccupation with the form of the corporation is illusory. If we grant that policy matters must be controllable by the political heads, and if we grant that policy matters and administrative matters are merely two ends of the same stick, then it appears likely that the degree of policy and, indeed, administrative independence, is determined not so much by the corporate structure as by the political considerations in the mind of the responsible minister and his colleagues.15 This comment, of course, reveals that Premier Blakeney was less inclined to dwell on the institutional properties of the corporate form of organization than on those of the institution of Cabinet. But in practice—especially during the early years of the Crown Investments Corporation — most Crown-corporation decision makers romanticized the notion of the conglomerate. For the lack of a better term, "corporatism" assumed the status of a secular religion. Its leading proponents, former bureaucrats who had made the trek to Crowncorporation land, were known as the "A-Team." Clutching well-worn copies of The M-Form Hypothesis, they expended as much (maybe more) intellectual energy seeking a "correct" interpretation of the "conglomerate" as they did examining the normative premises underlying its application to government enterprise in Saskatchewan. Such interpretations, while they abounded, are of little use in explaining a phenomenon that remains a chimera, even within the private corporate sector. 126

Saskatchewan: The Lateral Relations Design In his own interpretations, Saskatchewan's provincial auditor would not recognize the holding company as such, because there were no "common shares" and thus no "parent-subsidiary relationship."16 A senior Wolff Commission investigator—one familiar with a number of private-sector conglomerates — was also less than overwhelmingly convinced of the "authenticity" of Saskatchewan's public-sector conglomerate. He stated: It's a convenient way of controlling, from a political point of view, a heterogeneous group of outfits which may or may not have common denominators, except that the politicians have to control them somehow so they are fond of having this umbrella on top ... This view has various flaws and drawbacks which is why we attempted, without being naive enough to think we could dissolve it, to restructure it. We were left, in our design of things, for cic to function truly as a holding company, namely, a commercial holding company which would have full control over the competitive commercial corporations and not some political influence exercised sideways, as it were. Most Saskatchewan Crown-corporation decision makers —in the Devine as well as the Blakeney era—did not express their understanding of the Crown-corporation conglomerate in such comprehensive terms. They approached the question of the substance of Crowncorporation decision making in terms of the M-Form's differentiation between "strategic" and "operational" decision categories and responsibilities. Why, indeed, think in terms of "policy" and "administration" if you are a public-sector "conglomerate?" As in Alberta, where the prevailing theology was expressed in terms of distinctions between "policy" and "administration"—rather than "strategic" and "operational"—decision categories and responsibilities, I simply wanted to know the kinds of decisions that were being retained within the holding company rather than being delegated to individual Crown-corporation boards. What emerged was not one, but two "short-lists." Indeed, the list employed by the Blakeney government was slightly longer than the one employed by the Devine government. The Blakeney government, generally speaking, sought to locate decisions governing the formation, mandates, and all Crown-corporation investment decisions thought to have strategic significance, within the holding company. It sought to locate all other decisions, some of which were more subject to intervention by the holding company than others (a sublist that included industrial relations, personnel policy, and legal issues, but stopped well short of corporate administrative policy) within 127

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individual corporate boards of directors. The Devine government, while it purported to have dropped industrial relations, personnel policy, and legal issues from its short-list and to have reorganized the administrative apparatus of the holding company accordingly, sought to locate an otherwise identical list of decisions within the holding company. What differed much more significantly than the length of the decision list located by the Blakeney and Devine governments within the holding company was the actual deployment of the governmental organizational devices for integrating the decisions of individual corporate boards with those of the holding-company board. In both governments, Cabinet ministers performed an integrating role by virtue of their sitting on both the board of directors of the holding company and the boards of directors of individual Crown corporations; as chairmen during the Blakeney government, and as vice-chairmen during the Devine government. The Devine government, however, substituted the integrating role previously performed by holdingcompany staff, as board secretaries and members of the boards of individual Crown corporations, with a new integrating role performed by civilian board chairmen, some of whom also served on the board of directors of the holding company. This integrating role was "debureaucratized," in the sense that it was no longer a formal organizational function, although it continued to be performed in an informal fashion. Like the integrating role performed by politicians, it provides us with a key point of comparison when investigating the interactions and maximizing behaviours of different kinds of principal actors within the Saskatchewan Crown-corporation decision-making process. INSTITUTIONAL DECISION CONSTRAINTS In practice, these interactions and maximizing behaviours were conditioned by institutional decision constraints that varied not only with the length of the decision lists located within the holding company, but also (especially) with the deployment of integrating roles. Of the interactions taking place in or around the boards of directors of individual Crown corporations, the ones most frequently discussed were those occurring between the minister responsible for the Crown corporation and the corporate board. The traditional practice of having Cabinet ministers serve as the chairmen of Crown-corporation boards was most often described as a constraint on the independence of the boards. MacLean, for example, noted that Crown-corporation boards were "confined" by the "authority of Cabinet, acting through a minister who, as chairman of the corporation, could substantially influence a board."17 He did not, however, elucidate upon the logic underlying this practice. 128

Saskatchewan: The Lateral Relations Design Premier Blakeney, in a 1973 memorandum to ministers responsible for Crown corporations, explained the reasons for having holdingcompany staff serve as corporate secretaries and ministers as board chairmen. 18 "One of the real hazards of operating Crown corporations," said the memo, "is that the board and the government might not effectively control them, but they will be effectively controlled by management." Such managerial domination "cannot be easily prevented," the memorandum went on to say, "unless the chairman gives the corporation a great deal of time (which is undesirable) or unless the chairman has the assistance of some person, or persons, who are not directly associated with the management." For this reason, said Premier Blakeney, "all or most boards should appoint a secretary to the board of directors who would, for the purposes of that corporation, be responsible to the chairman and not to the management." As an employee of the holding company, the board secretary "not only provides staff support for the chairman but can also act as a coordinating person who can assist the Government Finance Office (which is a Cabinet committee)." In any "contest" between the management of a Crown corporation and Cabinet or its Crown-corporations committee, said the memorandum, "Cabinet ministers are expected to be on the Cabinet side, not on the management side." A minister who is serving as a Crowncorporation chairman, added Premier Blakeney, "must regard himself as a part of the governmental control and policy structure of the Crown corporation, and not part of the management structure" of the corporation. As such, the practice of having ministerial chairmen reflected the firm application of conventions of individual responsibility to the Crown-corporation instrument, as well as a constraint on the maximizing behaviours of corporate actors. There was little doubt, however, that the exercise of this prerogative was conditioned at all times by conventions of collective ministerial responsibility operative within the holding-company board and the full Cabinet. This particular blending of conventions of collective and individual responsibility, stated a former Blakeney Cabinet minister, restrained the tendencies of ministers "who were spending a great deal of their time" as chairmen of the board from descending into management, "something they are not selected to do." The premier, added a former Crowncorporation CEO, "wanted to use the cic to prevent ministers from playing their own political games." He noted that the one thing cic was designed to prevent was ministers treating Crown corporations as their own personal fiefdoms. The Devine government modified this set of decision constraints by removing certain kinds of principal actors from Crown-corporation 129

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boards and replacing them with others. What it sought were "independent" boards, in which holding-company staff would no longer serve as corporate secretaries or as board members; designated ministers would serve as vice-chairmen rather than chairmen; and "civilians" would serve as board members and chairmen. A former Devine Cabinet minister—who was also a vice-chairman of the CMB — explained the reason for these organizational changes as follows: "The boards were nothing. The politicians and the bureaucrats ran everything. It was totally tied together. Our view was that you have to put some distance between yourself and the Crowns. That's the reason for independent boards: to create that buffer." By removing holding-company staff from Crown-corporation boards, the Devine government eliminated an avenue by which these central-bureaucratic-monitoring agents had previously been able to maximize their own policy influence at the board level, as board members and advocates of their own decision perspective. Also, by having civilian chairmen but ministerial vice-chairmen, the government was able to move toward establishing the "buffer" it sought to place between itself and its Crown corporations. The role of the civilian chairman, explained one former civilian chairman, was "to interface with the government and to advise the president on political sensitivities as perceived by me, or the board, or governmental representatives. And he was able to zero in on the straight running of the corporation. I won't say that the running of it was not affected by the political sensitivities, but at least they need not have been uppermost in his mind, because that was the function of the civilian chairman." This reorganization of Crown-corporation boards de-emphasized the role of politicians, by assigning the lead role to civilian chairmen. It did not, however, diminish the ability of politicians to act as advocates of their own decision perspective at the board level—as vice-chairmen, rather than chairmen. Nor did it either enhance or diminish the ability of corporate management personnel to bring their own perspective to bear at the individual board level, an ability that might have been considerably enhanced had the government decided—as recommended by the Wolff Commission —to make Crown-corporation CEOS exofficio board members. The ability of either ministerial vice-chairmen or corporate management to dominate individual corporate boards was constrained, at least to the satisfaction of the Devine administration, by the authority of the civilian chairmen. And that authority was invariably described as "substantial."19 Of course, it is also necessary to take into account the interactions and maximizing behaviours taking place in and around the central locus of decision, the holding-company board. During the Blakeney 130

Saskatchewan: The Lateral Relations Design administration, there were two types of holding-company staff. First, were the corporate secretaries, who worked in a direct staff capacity for designated ministers individually responsible for specific Crown corporations. Others performed a more strictly defined analytical support role: primarily reviewing and evaluating Crown-corporation capital budgets to support the collective, ministerial decision making of the holding-company board. Both were the beneficiaries of a collegial decision-making relationship with cabinet ministers. For corporate secretaries, the degree of collegiality was comparable to that between a minister and a political aide; for analytical support staff, it was more comparable to that between the ministers serving on most any Cabinet committee and their central-agency staff. That is what the holding company was: a central agency. The degree of ministerial collegiality available to these centralbureaucratic-monitoring agents was immediately and drastically reduced by the Devine government—partly by changes in the duties and functions of holding-company staff, and partly by changes in the composition of the holding-company board. The chief executive officer of the holding company, for example, no longer served on the board of directors of the holding company; and, since corporate secretaries had been eliminated, they were in no position to maximize anything. Also, although the majority of holding-company board members were Cabinet ministers who doubled as vice-chairmen of individual Crown corporations, a minority of holding-company board members were civilian chairmen. This group of actors formed close working relationships with their ministerial colleagues at all levels of the Saskatchewan Crown-corporation decision-making process but demonstrated little inclination to form close working relationships with holdingcompany staff. As one holding-company official put it: "They've been doing this (running corporate organizations) all their lives and they're not going to stop now. They're not going to have any bureaucrats set up some kind of formalized mechanism that may or may not tell them what they want to hear. That would be an affront." The ability of holding-company officials to maximize their own policy influence was still further constrained by the removal of industrial relations, personnel policy, and legal issues from the list of decisions domiciled within the holding company. But although all these developments acted to reduce the "reach" of the holding company and its officials, they remained the only principal actors—other than politicians and corporate actors—to come even more than intermittently close to the Saskatchewan Crown-corporation decision-making process. By virtue of the analytical support role they continued to perform on behalf of the holding-company board, they remained in a 131

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position to maximize their own policy influence within that process. A senior holding-company official described that traditional role as follows: Boards recommend their plans to the board of the CMB. CMB staffers jump in with a vengeance and do the normal staff job of tearing it apart, looking at all the pieces, making sure that it makes sense. At the same time, CMB staffers take the plans of other Crown corporations and try to integrate all of these into a whole, to get a view of the Crown-corporation sector in aggregate. The staff then come to a view about the individual plans of the corporations and the implications of the aggregate package—the Crown sector plan—and make recommendations to the board of CMB. "If you strip away certain things from the old cic—like corporate secretaries, legal services, and industrial relations," said this official, "you're basically left with a group of financial analysts and business strategists," whose primary role was to "articulate the constraints of the capital-rationing process." According to MacLean this role was based on the "government's long-standing view that it is a central responsibility, not a responsibility of the individual corporations, to make final decisions on capital budgets—decisions which ultimately control the size and shape of the Crown corporation sector."20 For the most part, Crown-corporation management accepted this role as an unavoidable constraint on their own managerial discretion and relative autonomy, as long as the holding-company staff restricted themselves to the articulation of capital-rationing constraints. But whenever holding-company staff articulated decision-making constraints viewed by Crown-corporation management as extrinsic to the basic capitalrationing role of the holding company, the latter accused the holding company and its staff of indulging in the practice of "shadowmanagement." As one Crown-corporation executive noted: "If there was a natural antipathy, it would have been toward certain aspects of cic's role: what I would call the 'shadow-management role,' not the banker role. The banker role, well, you've got to deal with bankers. That is understood and sometimes they say 'yes,' sometimes ... 'no.' But when cic really hit the nerve in our corporation was when they started to shadow-manage, for example, union negotiations; secondguessing us in these negotiations." The potential for "shadow-management," an apt descriptor of the ability of holding-company staff to whittle away at the managerial discretion and relative autonomy of Crown-corporation management, 132

Saskatchewan: The Lateral Relations Design was greater during the Blakeney than the Devine administration. But even then, according to most observers of Saskatchewan's Crowncorporation decision-making process, this practice did not assume disconcerting proportions. Unlike in Manitoba, for example, it was unusual to hear that outright abrasiveness had fouled the interactions of corporate actors and central monitoring agents. It was more likely, especially talking to holding-company officials, to hear how the sharing of the corporate form of organization by the holding company and individual Crown corporations helped to constrain such abrasiveness. "The holding-company form is certainly more acceptable (than, say, a government department) to Crown-corporation management," said one holding-company official, "because it allows them to maintain some illusion about corporate life, orientation, and activity." The corporate organizational form "allows your central agency to be active in corporate life, to make its own investments, to be involved in dealmaking with banks and investment firms, to do corporate things that departments or central agencies cannot do." Crown-corporation management did not share this enthusiasm over the sharing of the corporate form of organization to the same extent. They tended to be more concerned with the actual potential for "shadow-management" than the form of organization in which it might originate. But the arguments advanced by holding-company officials to the effect that a common organizational form was helpful in constraining the development of any so-called culture gap between corporate actors and central monitoring agents are novel and well worth noting. As one holding company official commented: "There are natural affinities there—corporation to corporation—that don't exist from corporation to department. You know, you hear it all the time. How bureaucrats don't understand what a balance sheet is, never had to make a payroll, and so on. It is conditioning and it is a bias, but it is a real fact of life that has to be dealt with. The last thing you need is more barriers." Observation of institutional decision constraints conditioning the interactions of the various principal actors in or around primary decision forums in the Saskatchewan Crown-corporation decision-making process revealed the high priority placed by the various Saskatchewan governments on integrating the decision making of individual Crown corporations with that of the holding company. While these decision constraints did not eliminate the potential for various forms of maximizing behaviours, it was not uncommon to hear the Saskatchewan process being described —in ideal terms —as a serial process of reconciliating the decision perspectives of the various kinds of Crown-corporation decision makers as well as the public-policy and commercial objectives of Crown corporations. Commented one observer of this process: 133

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The first line of integration between commercial and non-commercial objectives is the board of directors of each corporation which, for each corporation, establishes its objectives and priorities. The point of resolution, if there are insoluble conflicts at the individual corporate level or if broader governmental objectives come to pose a different order of priorities, is the board room of the holding company. (That is) where all perspectives—commercial and non-commercial—are brought together and put under a microscope that looks, not only at the good of the individual corporation, but also the good of the corporate group and the province. The Blakeney and Devine governments used different combinations of integrating roles to inform this serial process of reconciliation. What they had in common, however, was their desire to exercise control over Crown corporations by having at their disposal not only information flowing vertically within the formal Crown-corporation decision-making process, but also horizontally within the informal decision-making process. That is why they not only insisted on being present at all levels of the Crown-corporation decision-making process but on establishing integrating roles other than their own to assist them in articulating their ownership prerogatives. In their efforts to capture both streams of information, Saskatchewan politicians developed a unique approach to the monitoring and control of Crown corporations—one that monitored both vertically, to support the evaluation of Crown-corporation performance; and horizontally, to detect strategic behaviour. INFORMATION AND INFORMATION PROCESSING Both the Blakeney and Devine governments placed a high priority on the systematic generation of information to support the prospective evaluation of Crown-corporation performance within a strict capitalrationing process. They placed less of a priority, however, on the systematic generation of information for a retrospective evaluation of Crown-corporation performance; that is, for post-decision monitoring not directly tied to the capital-rationing exercise. The general idea, according to G.H. Beatty (a former holding-company CEO), was to arrive at an "overview" that would allow the government to "'keep on top' of what's happening in the corporations," permitting it to exercise control "at the planning stage" and "focus clearly on those matters which are clearly the legitimate concern of the owners—the capital investment decisions and the corporate plans."21 For purposes of the planning (prospective evaluation) cycle, the 134

Saskatchewan: The Lateral Relations Design holding company served as a centrally located information collectionand-processing resource to a centrally located decision point, the board of directors of the holding company. The information-sharing relationship between the holding company and individual Crown corporations during this annual cycle was one in which the movement of information to support the collective decision making of the holding-company board was essentially vertical in nature. It was vertical in the sense that the capital budgets (and, in the Devine government, the strategic plans) of individual Crown corporations had to be formally communicated to the holding company for assessment, priorization, and approval. The holding company, quite simply, had unrestricted access to the key planning assumptions of individual Crown corporations, and to any aspect of a corporation's performance that might possibly have a bearing on the annual investment proposals of that corporation. Otherwise, for the most part, the information-sharing relationship between the holding company and individual Crown corporations was relatively self-contained. This is because most corporate performance data, other than basic financial and accounting data, did not have to be shared with the holding company on any routine basis. "Once the plan is approved," said a senior holding-company official, "it is the responsibility of the individual company to implement it and evaluate performance. There is no hard, systematized, retrospective evaluation of corporate performance at the centre." Instead of basing their evaluation of Crown-corporation performance solely—or even primarily— on the extension of formal information taxonomies, Saskatchewan politicians used the integrating roles of their holding-company apparatus to capture additional information flowing horizontally within the informal Crown-corporation decision-making process.22 "Whether you use one approach or another," said a former Blakeney Cabinet minister, "is a function of how many decisions you want to make. We, as a government, were making a lot of decisions. So it made sense to have the information flowing in on a regular basis." The movement of information from Crown corporations to the government, he said, took the form of two distinct streams. The first was a "significant flow of routine information" from the corporations to the holding company; the second, a "situational and pragmatic flow" from the corporations to Cabinet via the agency of Cabinet, the holding-company board. The latter stream, which was institutionalized during the Blakeney years in the form of the integrating roles performed by ministerial chairmen and corporate secretaries, was known colloquially within the Blakeney Crown-corporation decision-making process as the "trip wire." Explained one Blakeney Cabinet minister, "If one of your problems is that your board, or CEO, or minister might 135

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not be operating effectively, you need your 'trip wire.' You need your information before your problem breaks. How much you need—how much advance information or early warning system—is always a judgement call." MacLean, who did not discuss trip wires in his official history of the holding-company instrument, described the role of holdingcompany staff who served on individual Crown-corporation boards as "links to the cic and its board, providing up-to-date information on significant developments and issues in the corporations."23 This stream of information, which included items such as board agendas and minutes, was "sifted" by analytical staff, said a former holdingcompany staffer, so as to detect things that were "controversial or significant from the financial standpoint." Any such items would then be brought to the attention of the holding-company board. Noted that same holding-company staffer: "In order to sift out that exceptional material, we had to have access to a fair bit of material from the Crowns. We made a second-level judgement the Crowns might not have made that was of significance to the government from a broader perspective than just that of the corporation itself. That's where our 'value-added' came in." "They were certainly set up to monitor," recalled one Blakeney era Crown-corporation CEO, "but the question is, what were they monitoring"? Such monitoring, he said, "was more of a 'touchy-feely' type of observational process than anything that would result in any hard and fast judgments about rate of return, managerial effectiveness, that sort of thing." Nevertheless, he said, "the interesting thing about the cic information empire was the phenomenal lengths its agents would go to get information from a variety of sources at different levels of the corporation and outside the corporation." In a comment which partially answers his own question about what was being monitored, this spokesman testifies to the pervasiveness of the former premier's "trip-wire" approach to the management of information: "It wasn't that I was so insecure I had to control the information. I just didn't want to be called to the Premier's office when he had information that I didn't. Which, of course, was one of the Premier's favourite tricks. That was one of his ways to keep people off-base; to know more than anyone else, including you, about your own area." "There was lots of monitoring activity, looking for potholes, and preventive maintenance," recalled a former senior holding-company official, but "there was never any formalized monitoring process," leading him to conclude that "this is one area where the Saskatchewan model of Crown corporations did not live up to expectations." A former cic chairman, however, professed to have come to the view that "the 136

Saskatchewan: The Lateral Relations Design fewer numbers you have to do an analysis of the performance of a Crown corporation, well, almost, the better." Moreover, a former deputy minister to the premier maintained that "the system Blakeney set up anticipated game playing with information; that by having ministers and corporate secretaries sitting in on corporate boards, Cabinet had its own direct channel and did not have to rely purely on the information it was getting through formal channels." When the Devine government replaced corporate secretaries and ministerial chairmen with civilian chairmen and ministerial vicechairmen, it retained its "trip wire" by assigning the integrating role previously occupied by holding-company staff to civilian chairmen, without significantly altering the integrating role occupied by designated ministers. One rather immediate consequence of this realignment of integrating roles was that the information previously supplied to analytical staff within the holding company by their colleagues serving on Crown-corporation boards was shared only at the discretion of the civilian chairmen. Which is to say, of course, that it was no longer shared. "One thing we're really lacking that we had before," said one CMB staffer, "is access to the board material of the individual corporations." She noted "We used to get the agendas and that was very useful to us. If you skimmed through the agendas, you could anticipate some major strategic issues before they were formally brought to our attention. It provided us with an environmental scan of what was going on." The "trip wire," in effect, was transferred to the custody of a smaller number of well-placed actors—a network comprising civilian chairmen and ministerial vice-chairmen, as well as top holding-company officials. "We discover things and raise them with our president," said one CMB staffer, "but he already knows." What had happened, opined this staffer, was " a short-circuiting of the bureaucracy and the decision-making process by an information network based on personal contacts." He added "There are no rules. There is no decision-making process from day to day. Decisions are made but the way they are made differs from case to case. Ministers go off and make their decisions; boards go off and make their decisions; we get depressed." A former Blakeney Cabinet minister, commenting on alternative ways to design a Crown-corporation decision-making process, observed, "You can set up a system that looks very arm's-length but can be very hands-on; or the other way around." Similarly, a ranking public servant who served a succession of Saskatchewan governments observed, "There's an equal amount of control even though, on the face of it, it doesn't look like it." There are "ways", said this observer, that "the government ensures that the corporations are responsive to 137

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its broader objectives in spite of not appearing to be so as much as the Blakeney government. They've just set it up to give the opposite appearance." Holding-company management personnel, during the early years of the first term of the Devine government, formulated a revised mandate for themselves that called for the establishment of framework policies in the area of financial management, as well as sector-wide evaluative processes to be supervised by the holding company. One of these framework policies, recalled a CMB staffer, called for an ambitious performance-monitoring regime, in which the holding company would use "key performance measures" to monitor progress toward "established individual Crown-corporation performance targets." This measurement process, which proposed that the holding company once again have access to the agendas and minutes of individual Crowncorporation boards, was geared to support another framework policy that called for the explicit subsidization of Crown corporations by the government for costs incurred in the pursuit of non-commercial objectives. These framework policies, in fact, incorporated much of the conceptual emphasis on post-decision monitoring later developed and advocated by the Economic Council of Canada in Minding the Public's Business. Said one senior holding-company official: There were no standards of performance held by the cic or individual Crown corporations to monitor things like return on investment, capital structure. We wanted to create such standards; to centre this initiative within the CMB and negotiate the exceptions. We would then be able to measure movement towards goals, track improvements in performance, or suggest corrective action where required. We got a lot of static from the newly autonomous boards. It was a formal and rigorous process but it would not have interfered with operations. "The conceptual framework the CMB developed to monitor the pe formance of Crown corporations was good," recalled one Crowncorporation CEO, "but, in practice, they couldn't establish the appropriate measurements and performance criteria and they wanted to impose abstract, all-encompassing financial criteria on all the Crown corporations ... which was fought tooth and nail by all the boards." The revised holding-company mandate, in fact, presented the politicians on the Devine holding-company board with a clear choice. They could, on the one hand, choose to retain their "trip wire;" that is, their placement of civilian chairmen within the integrating role previously occupied by corporate secretaries so as to monitor information 138

Saskatchewan: The Lateral Relations Design flowing horizontally within the informal Crown-corporation decisionmaking process. They could, on the other hand, approve a strengthened mandate for the holding company. Such a mandate was strictly oriented to the monitoring of information flowing vertically within the formal Crown-corporation decision-making process and would have domiciled the rigorous, systematic retrospective evaluation of Crown-corporation performance within the administrative apparatus of the holding company. Confronted with vigorous opposition to the revised holdingcompany mandate from the boards and the civilian chairmen, these politicians swiftly and irrevocably chose to retain their "trip wire." "We attempted some changes in measurement systems," said a former CMB vice-chairman, "which were based on a nice theoretical argument, but in the end it was an extension of the bureaucratic control of Crown corporations." A former Blakeney Cabinet minister more or less concurred, saying, "If you try to institutionalize it (the monitoring), make it accurate, that would be a very complicated business. The process, the bureaucratization that would be necessary, would be so great that people would just go around the bend." The Devine administration, as noted earlier, domiciled a shorter list of decisions within the holding company than the Blakeney administration had done. This meant that its information taxonomies did not extend to matters such as industrial relations, legal, and personnelpolicy decisions. Also, its use of integrating roles to capture information flowing horizontally within the informal Crown-corporation decision-making process was not as explicit or aggressive as that of the Blakeney administration. Nevertheless, the emphasis it placed on the collection and processing of information to support the prospective evaluation of the annual capital-rationing exercise did not significantly differ from that of the Blakeney government. A civilian CMB board member expressed that point as follows: "The ultimate hammer (with which) to control a multi-product company is control of the capital purse-strings. The second one is the ability to say 'give me your plans.' You've got to see, in Saskatchewan, that you do have a capitalrationing environment. That's the best way to control any kind of multi-divisional enterprise." One consequence of the mandate-setting exercise described above, according to a senior holding-company official who worked for both the cic and the CMB, was that "the CMB is now more rigorous and systematic in its analytic tools than the cic used to be." This was the case, he said, because individual Crown corporations were obliged to submit (and CMB analysts thus had at their disposal) corporate strategic plans, pro forma financial statements, and capital budgets. The CMB staff conceded the existence of something of an "information gap" 139

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(which, in the cic days, could be bridged with access to board material) between the receipt of strategic plans and capital budgets, in which "the corporations could be looking at new initiatives or getting into all kinds of trouble." But they emphasized that they were no longer obliged, as they had been in the cic days, to infer the key planning assumptions of Crown corporations from a review of their capital budgets. At the heart of the capital-rationing exercise, as outlined in a twopage summary of the format for corporate strategic planning used by Saskatchewan Crown-corporations, was the identification of "strategic alternatives" and discount rates used to calculate minimum hurdle rates for capital projects and in "valuing the net present value of alternative strategies."24 This information was intended to provide a common denominator for the evaluation and selection of competing investment proposals within the context of a limited supply of available capital —in Saskatchewan, an ever-present consideration. Holdingcompany staff, who described the potency of net present-value analysis (or, alternatively, the threat of employing it in a project-specific context) in terms approaching near reverence, also pointed to other vestiges of the failed mandate-setting exercise: "The earlier work that was done here gave us enough of a basis that we now have some good rules of thumb as to what the appropriate debt to equity ratio should be, or (the) return on investment. We run strategic plans as they would look if the corporations were operating in a purely commercial way; ... the differences are the opportunity costs. It's not part of the formal process but we do tend to look at these things on an ongoing basis." "There are different kinds of information advantage," reasoned one holding-company official, "which go along with access to different streams of information." On the one hand, reasoned this official, "there is information which moves up from the bottom and is held to the advantage of corporate management." On the other hand, he noted, "there is information held to the advantage of those at the centre." These two streams of information, according to this official, "ostensibly" met in the boardroom of the holding company but, in practice, they met "all over the map." It was here, he argued, that the "integrators" entered the picture; "those with the skills, the ability, the time, and the mandate to get detailed information from the corporations" on behalf of the holding-company board. If anyone had an information advantage in the Saskatchewan Crown-corporation decision-making process, argued this official, it had to be the "integrators." But which integrators were these? The analysis advanced by this holding-company official did not discriminate between information 140

Saskatchewan: The Lateral Relations Design flowing vertically within the formal Crown-corporation decisionmaking process and information flowing horizontally within the informal Crown-corporation decision-making process. Nor did it discriminate between those responsible for the handling of these two streams of information: the analytical staffers within the holding company in the case of the vertically derived information, or the occupants of integrating roles in the case of the horizontally derived information. Because these two streams of information, like those identified by the holding-company official, intersected—one way or another—within the boardroom of the holding company, it is difficult to reject the conclusion that the information advantage in the Saskatchewan Crowncorporation decision-making process belonged to politicians in their capacity as members of the holding-company board. Whether integrating roles other than those occupied by politicians were assigned to holding-company staff, as was the case in the Blakeney government, or to civilian board chairmen, as was the case in the Devine government, it was a decision made by the politicians. And that decision determined, within any particular administration, the distribution of information advantage. STRATEGIC BEHAVIOUR The proposition that politicians claim credit for the activities of Crown corporations when such activities are likely to have positive political returns, but distance themselves in situations where political returns are likely to be zero or negative, has had an enduring application to the Saskatchewan Crown-corporation decision-making process. It is subject to one qualification, however. In Saskatchewan, the use of the Crown-corporation instrument was so visible—given an underdeveloped, private corporate sector situated within an essentially agrarian economy—that the province's Crown-corporation sector often appeared to dwarf the conventional corporate community. This larger-than-life visibility of the Crown-corporation instrument reduced the ability of Saskatchewan politicians to distance themselves from it in circumstances of political adversity. That did not, of course, prevent them from trying. Like Manitoba's politicians, they denied themselves the distancing possibilities inherent in the traditional arm's-length relationship. At the same time, their own extensive and visible involvement at all levels of Saskatchewan's Crown-corporation decision-making process effectively precluded any opportunity to practise the surreptitious "predistancing" that was the norm in Manitoba. Nevertheless, said a former Blakeney Cabinet minister (and cic chairman), the practice of selective 141

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responsibility was "easy to do with the resource corporations, the socalled commercial Crown corporations." This, he said, was because, "if things are going well, it's because you're managing them well; but if they're going poorly, it's because of world marketing conditions over which you have no control." During a resource boom the Blakeney government used this stratagem extensively to claim credit for the commercial successes of its resource corporations. The Devine government also used the stratagem for a time, to distance itself from the commercial woes of these corporations during a resource slump. Indeed, it was an attractive competitor to the notion of having a traditional arm's-length relationship while things were "going well." In a resource boom, the need for politicians to distance themselves from Crown corporations was minimal and intermittent. When things were going "poorly", however—as in a resource slump—the appeal of this stratagem was considerably diminished. Although the need for politicians to distance themselves from Crown corporations became continuous and acute, there was, without an arm's-length relationship in place, quite literally no place for them to hide. During the Blakeney administration, the term "Crown corporation" was rarely uttered by NDP politicians without considerable reference to the commercial successes of its resource-based Crown corporations and/or the growth of the Saskatchewan Heritage Fund, an accounting device set up to capture non-renewable resource revenues and reinvest them in the resource corporations. Like the Alberta Heritage Savings Trust Fund, the Saskatchewan Heritage Fund released a percentage of its resource revenues (50 per cent, compared to Alberta's 30 per cent) to its Consolidated Revenue Fund, the province's main operating account. But unlike the Alberta Fund, which simply loaned most of the rest of its revenues to Crown corporations, the Saskatchewan Fund purported to make "equity investments" in its Crown corporations which, in turn, would pay "dividends" to the Heritage Fund, thereby reflecting their commercial successes. The Potash Corporation of Saskatchewan, for example, declared dividends of $50 million in fiscal years 1981 and 1982. These dividends, in turn, became dividends from the Heritage Fund to the Consolidated Revenue Fund. By 1981, when the assets of the Heritage Fund were estimated to be more than $1 billion, the economic wisdom of the Blakeney resourcedevelopment initiatives was held by the Blakeney government to be self-evident. Heritage Fund dividends, of course, were a function of the total tax and royalty revenues generated within the non-renewable resource sector, not just the dividends forthcoming from the resource-based 142

Saskatchewan: The Lateral Relations Design Crown corporations. But this apportionment did not stop the Blakeney government from using the Heritage Fund device to vindicate its Crown-corporation-based resource policies on every possible occasion, especially that of the finance minister's annual budget address to the Saskatchewan Legislature. These addresses, which invariably announced new dividend transfers from the Heritage Fund to the Consolidated Revenue Fund, epitomized the Blakeney government's penchant for fiscal self-congratulation. "Using the Heritage Fund and Crown corporations as major investment tools," said the finance minister in his 1982 budget address, "we intend to proceed with our ambitious plans to develop Saskatchewan's natural resources." Then, moving on to the dividend announcement, he said: "This year, Mr. Speaker, I am pleased to announce that the Heritage Fund will pay a dividend of $740 million." The other part of the message, also a familiar refrain during the Blakeney years, emphasized to the Saskatchewan voters the connection between Heritage Fund dividends and "premium-free hospital insurance, operating grants to schools, our hog and beef stabilization programs, the new senior citizens' shelter allowance" and so on.25 Or, as considerably less formally expressed by a former Blakeney Cabinet minister: "If the customers are external to Saskatchewan, then certainly you will be attempting to maximize profits. The way to maximize votes is to maximize profits. Then you've got some money to spend. You're going to do better if you can say, 'look, this potash corporation is making a lot of money. We are therefore successful administrators and therefore wouldn't you like a new school—from the potash money.'" Not content to restrict its claiming of credit to the floor of the Saskatchewan Legislative Assembly, the Blakeney government embarked, during the late 1970s and early 1980s, on an extensive public relations and advertising campaign to "generate public awareness of and confidence in the work of Saskatchewan's 'family' of Crown corporations."26 The Devine Opposition Tories, who were quick to denounce this advertising campaign as "a complete and utter abuse of the public trust ... done for purely partisan political purposes,"27 were promptly accused by NDP politicians of plotting to "dismantle the family of Crown corporations in Saskatchewan" and "turn them over to their corporate friends."28 The Tories, distanced as much from the Crown-corporation sector by the rhetoric of the Blakeney government as their own philosophical distaste for the Crown-corporation instrument, made heavy use of a number of populist themes leading up to the 1982 Saskatchewan general election. They charged, for example, that the Blakeney administration, by "overinvesting" in Crown corporations, had "altered its priorities from the social needs 143

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of Saskatchewan residents to an obsession with making money through Crown corporations."29 They also charged that those responsible for the management of the Crown-corporation conglomerate "had become not unlike the boys from Bay Street,"30 and that "to call a government bureaucracy a 'family' is an insult to all the real families of Saskatchewan."31 Convinced that the distance between themselves and the Crowncorporation sector had been a critical factor in its decisive election victory, the new proprietors of government enterprise in Saskatchewan were almost immediately confronted with a collapse in world commodity markets, a plunge in resource revenues, and a faltering provincial economy that resulted in the first of an unbroken series of deficit budgets. "We, in Saskatchewan, feel like David without a slingshot," said the new finance minister in his first attempt at distancing himself from the Crown-corporation instrument while in power. He added: "The Heritage Fund—our hedge against tough times —was empty. It had fed the ravenous appetite of the Crown corporations."32 The Devine government, deprived from the start of opportunities to claim credit for the commercial successes of Saskatchewan Crown corporations, consistently sought to absolve itself of responsibility for the economic maladies affecting Crown-corporation performance. It placed the blame either on "uncontrollable factors" such as world commodity markets, or on the "errors" of the Blakeney government in establishing resource-based Crown corporations in the first place. But instead of fashioning a conventional arm's-length relationship on which to base their practice of selective responsibility, these politicians immersed themselves at all levels of the Crown-corporation decisionmaking process. As discussed earlier, they linked themselves to the Crown-corporation instrument in ways that did not differ substantially from those of the Blakeney administration. As one holding-company official stated: The government made a lot of surface noises. Have private sector chairmen; reduce the role of the holding company; make the Ministers only vice-chairmen. But the first time they went back to their home towns and got complaints because one of the Crown corporations had done this, that, or the other thing, they realized it wasn't a workable model. They still continue to talk about making Crown corporations more commercially oriented, distancing them from the government. A lot of that is just window dressing—window dressing undertaken in good faith. But the realities will not allow it to go any further than the surface. 144

Saskatchewan: The Lateral Relations Design "What you have in Crown corporations," said a Devine Cabinet minister serving on the CMB board, "is a bastardized corporation." His explanation was that "if you go back to the premise of a struggle between politics and economics, politics will always come first." That was his way of saying that the public-policy objectives of the Crowncorporation instrument could not be ignored. "It was still a case of let's build this other potash mine because unemployment is getting severe," he said. "So you still have that world of tampering with Crown corporations." Thus, according to a senior holding-company official, although there was "a lot of lip service being paid by this government to the idea of making Crown corporations more commercial and businesslike," the Devine government was "as concerned as the last one in using Crown corporations to do this or that in the economy; for example, keeping the mines open in the potash corporation." This, of course, the Devine government proceeded to do during a period of potash oversupply, depressed markets, and repeated corporate deficits. In the midst of a potash slump, with most Saskatchewan potash producers operating at only 75 per cent capacity, it authorized PCS to proceed with a $425-million expansion that would triple its capacity at its Lanigan potash mine. The construction effort was touted as the "second-largest in the province."33 Politicians, wishing to increase employment and avoid lay-offs in the resource corporations, often emerged as at odds with their own corporate boards, who were not always sympathetic to this public-policy consideration. As a civilian member of the CMB board pointed out, the need to seek a strategic reconciliation of the commercial and public-policy objectives of Saskatchewan Crown corporations was not initially recognized by all within the Saskatchewan Crown-corporation decisionmaking process. It was certainly, however, recognized by the politicians. Saskatchewan has a number of Crown corporations which are almost purely commercial in nature. The practicality is you cannot run them on the basis of purely commercial decisions. There was some frustration there. The boards of directors wanted to run them on a purely commercial basis and the politicians felt we must continue to employ people. There is a forum to deal with these frustrations, but it took the government a while to understand who had to call the ultimate shots. The Wolff Commission had said, "Let's keep the politics out and run them in a businesslike fashion." But the goal of any management is to accomplish the wishes and directives of the owner. And the ultimate owners of these resources are the people, represented by the politicians. 145

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They're the ones who go out there and meet the electorate. They're the guys who are responsible. They're the owners. These politicians, of course, were not at all comfortable with the idea of emulating, for example, T. C. Douglas's defence of the existence of a shoe factory or brick plant, or Manitoba politicians' defence of the existence of a ManFor or a Flyer Industries. That is, they were uncomfortable extolling the public-policy performance of commercially unsuccessful Crown corporations. Wishing to establish some distance between themselves and these corporations, they drew closer to the concept of "public participation." This concept, defined by the minister of finance in a 1985 presentation to the Institute for Research on Public Policy as "a wide distribution of equity or quasi-equity in our Crown corporations,"34 provided the Devine government with a rationale for a series of public- and private-sector governmententerprise initiatives during its first term in office. Beginning with a Saskatchewan Power Corporation savings bond in 1984, followed by a SaskOil participation bond (a bond yielding interest plus returns based on the performance of the company), the Saskatchewan government, in late 1985, extended its public participation approach to include the sale of 40 per cent of the equity of SaskOil. This action yielded an ownership arrangement that removed SaskOil from the conventional Crown-corporation decision-making process and placed it within the CMB "portfolio management" stream (along with IPSCO, Agra Industries, and so on). No longer did SaskOil have a ministerial vice-chairman to field questions in the Saskatchewan Legislature or its Crown-corporations committee. In fact, it was never clear to anyone outside the confines of the CMB boardroom (except, presumably SaskOil board members and management) how the Saskatchewan government continued to apply its ownership prerogatives to the province's shareholdings in this former Crown corporation. Nevertheless, despite the fact that this ownership arrangement carried with it the "ghost" of a former Crown corporation, at least during question period, the intrinsic appeal of this Alberta-style "mixed enterprise" approach made eminent sense to the minister serving as CMB vice-chairman, who stated: "The politician cannot run away from decisions by Crown corporations unless they are partially privatized. The way the politician now sees SaskOil is, well, hands off. My constituents have shares in that corporation and do not welcome political interference." Early in its second term of office, the Devine government established a Department of Public Participation to superintend a series of privatization initiatives. The public participation agenda was extended to include several privatizations, partial privatizations, and one abortive 146

Saskatchewan: The Lateral Relations Design near privatization of Saskatchewan Crown corporations. Of the commercial resource-based Crown corporations, three were affected. Saskatchewan Minerals, a sodium sulphate mining company established by the Douglas/Lloyd CCF administration in the 1940s, was sold out right. The Saskatchewan Mining and Development Corporation was merged with Eldorado Nuclear Ltd., a federal government Crown corporation, with the intention of either full or partial privatization of the merged entity. Finally, in the autumn of 1989, the Potash Corporation of Saskatchewan — the Blakeney government's flagship, resource-based Crown corporation—was partially privatized along much the same lines as SaskOil. There is little doubt that the Devine administration came to believe, in its second term of office, that partial privatization was the only way it could put any distance between itself and its Crown corporations. The notion of being able to substitute "portfolio management" for the hands-on managerial role these politicians had so far found irresistible became even more irresistible. Why? Perhaps they were inspired by the Alberta approach. Maybe it was just ideology.35 What we will never know is how these politicians would have behaved had the "good times" continued to pertain within the resource sector. At any rate, the Devine government's faith in public participation was badly shaken by the political furore that ensued from its intended partial privatization of the Saskatchewan Energy Company (SaskEnergy), the former Natural Gas Division of the Saskatchewan Power Corporation. Following a marathon seventeen-day bell-ringing episode in the Saskatchewan Legislature, a wave of opposition-inspired town meetings, a 100,000 signature petition rejecting the move, and a government-appointed commission of enquiry that recommended the government proceed with the measure, the Devine government backed down. Less than six months later, the Department of Public Participation was disbanded. Relentlessly questioned in the Saskatchewan Legislature by the Roy Romanow-led NDP opposition about the decisions and activities of former Crown corporations that had lost little of their public profile despite having been wholly or partially privatized, the Devine Tories sought to emulate their Alberta counterparts and practise their long-dreamed-of selective responsibility. What they failed to include in their calculus was the fact that Peter Lougheed did not have to hide from ghosts. The practice of selective responsibility — alternatively, the idea of being able to practise it—approached the dimensions of an obsession with Saskatchewan politicians. Yet there was no "trade" between politicians and Crown-corporation managers, said one holding-company official, which involved the latter "getting in close during the good 147

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times and being the whipping boy during the bad times." Rather, said this official, there was an explicit understanding that Crown-corporation managers were "expected to have sufficient sensitivity to the noncommercial interests of the minister to be able to identify those situations in which pure commercial considerations should not win out." This observation accords quite well with our proposition of selective rationality: that corporate actors subordinate the commercial objectives of Crown corporations, if need be, to the public-policy objectives of political actors in exchange for enhanced managerial discretion and relative autonomy. Such a stratagem, in fact, was described by a former holding-company CEO as "a positive," rather than a normative, "job requirement" of a Crown-corporation executive in Saskatchewan. A senior Wolff Commission investigator, commenting on what he recognized to be the practice of selective rationality by Saskatchewan Crown-corporation management, opined that such behaviour rendered them "a subordinate group in comparison to their counterparts in private industry." This, he said, was because "they have to be, by definition, subordinate to the very politicians by whose tolerance they operate." What this investigator overlooked, however, was that in a jurisdiction where the public had come to expect, as a matter of course, that the minister responsible for a Crown corporation would be as knowledgable about the corporation as its management personnel, the Crown-corporation management had a potentially potent information advantage over politicians. This is why the Blakeney government, as discussed earlier, established a series of integrating roles to informally monitor exchange relationships between corporate and political actors at the board level — a practice continued in a slightly different form by the Devine government. From the standpoint of information processing to support organizational decision making—as distinct from the standpoint of formal authority relationships —the practice of selective rationality by Saskatchewan Crown corporation management did not constitute a "superior-subordinate" relationship. Rather, it constituted one in which the information advantage of those occupying integrating roles forced information sharing and joint decision making at all levels of the Crown-corporation decision-making process, beginning at the individual board level. During the Blakeney administration, when Cabinet ministers served as board chairmen, the relationship between the designated minister and Crown-corporation management took the form of a direct exchange-relationship between the ministerial chairman and the chief executive officer of the Crown corporation. In this relationship, said a former Blakeney Cabinet minister, "the skilful interaction between a minister and his CEO is one where the minister says, 'Here are our objectives, you keep me out of trouble, and if you think I'm going to 148

Saskatchewan: The Lateral Relations Design get in trouble, give me a shout. Meanwhile, we're best off if we maximize profit. So go out there and maximize profit.'" Such an arrangement was acceptable to the CEO, said this former minister, because "by maximizing profits, ... he's going to maximize his status. When he's moving around in the industry, he can point to his bottom line and say, Tm an operator.'" Although the Blakeney government encouraged this kind of direct exchange-relationship, it also feared that such a relationship, if pursued too vigorously, might result in a clandestine "alliance" between the designated minister and the CEO to make decisions without the knowl edge of Cabinet or the agency of the Cabinet. Hence the need for the "trip wire," discussed earlier, in which holding-company staff, in the words of a former corporate secretary, could "neutralize" the strategic information advantage of corporate actors. As that corporate secretary noted: "Corporate management, regardless of sector (public or private), will be able to deal with its board, shackle its decisions. Because management has all the information, all the facts. Where this changes— in the Crown-corporation sector—is that it is easier for a minister to bring his management to heel. He has bureaucrats to look over the shoulder of management and provide him with additional information." The holding company, as noted earlier, was thought by some Blakeney-era Crown-corporation decision makers to have the capacity of acting as a "buffer" between ministerial chairmen and Crowncorporation management. If a ministerial chairman, as a former cic chairman pointed out, had a "problem" because his CEO maintaine that "the problem with the bottom line is that you impose too many social objectives," while his political colleagues maintained that "you spend too much time on the bottom line and not enough on social objectives," this question could be referred to the holding company. "What you had," said this former Blakeney Cabinet minister, "was an inherent problem; but the cic was an attempt to have someone other than Cabinet monitor this kind of thing." Similarly, said a former holding-company official, "If the minister went too far, if he was directing the corporation to do things that were too blatantly political — too anti-commercial — the management of the corporation could turn to the cic and say, 'Look, I'm getting pushed too hard by the minister and I need some countervailing force.'" The general idea behind the "trip wire," said this official, was not to put the "squeeze play" on either ministerial chairmen or Crown-corporation management personnel. Rather, he argued, it was to "create the lateral decision mechanics that bring top management together with the politicians, so you have an integrated basis of information, values, and criteria on which to make joint decisions." 149

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The Devine government, when it replaced ministerial chairmen with civilian chairmen, removed the formal basis for any direct exchangerelationship between the minister responsible for a Crown corporation and the chief executive officer of the corporation. Because this arrangement presumed that no informal exchange-relationships between ministerial vice-chairmen and Crown-corporation management could occur without the knowledge of the civilian chairman, the need for a "trip wire" was less obvious than originally assumed during the Blakeney years. This did not mean, however, that it was no longer a "positive," rather than a normative, "job requirement" of Crown-corporation management to indulge in the practice of selective rationality. What it did mean, inasmuch as civilian chairmen inherited the integrating role previously occupied by holding-company staff, was that any exchangerelationships between ministerial vice-chairmen and Crown-corporation management were monitored and superintended by civilian chairmen. This aspect of the role of civilian chairmen was described by a senior holding-company official as follows: The chairmen became the buffer zone in which the CEO and the politician were to work things out with each other. Which is to say that the CEO now has someone to complain to about "I shouldn't do this, so you handle the politics with the vice-chairman or the government." It works the other way too, the politician working things out with the chairmen. In their view (the view of the civilian chairmen) this is the natural order of things in terms of how things ought to be run: without political interference but with some political sensitivity. The CEO can defend against political interference and the politicians can blend in their political wishes through the chairmen. It's all sort of swallowed easier. Crown-corporation management, said one civilian chairman, "prefers the system used by the Devine administration," not only because it "gets those unknown monkeys off their backs," but because "they now know who is making decisions and whose policy they have to follow." Constraints on the ability of Crown-corporation management to maximize its own managerial discretion and relative autonomy were certainly less intrusive in the Devine than the Blakeney administration. The reason was that it was civilian chairmen—not holding-company staff—who monitored horizontally in order to detect strategic behaviour at the board level. This substitution of integrating roles, however, in no way diminished the monitoring capacities of their occupants. "To protect themselves," said a senior holding-company official, "management of Crown corporations tend to elevate a far larger 150

Saskatchewan: The Lateral Relations Design number of things to its board of directors than is done in the private sector." The reason for this, opined this official, was that "corporate management has a general sense of the political concerns that permeate their environment"; rather than the "air-tight reading" of the politicians. His observation was that "in order to play it safe, things get elevated to the board where, by definition, they become decisions of corporate and political influences. They are jointly made."

ORGANIZATION DESIGN Information-processing and decision-making practices by which Crown corporations were linked to the Saskatchewan government— interpreted, that is, from the standpoint of alternative Crowncorporation organization designs theoretically available to structure the government/Crown-corporation decision-making relationship—most closely approximated the lateral relations Crown-corporation organization design. Saskatchewan's practice incorporated a structural differentiation of decision categories and responsibilities that sought to locate a list of decisions of intermediate length within the central institutional framework of the government, locating all other decisions within the boards of directors of individual Crown corporations. This practice conformed, for the most part, to the equivalent emphasis on corporate autonomy and institutional control predicted by the lateral relations Crown-corporation organization design. Also, because formal information collection and processing to support the Saskatchewan Crown-corporation decision-making process was augmented by the use of integrating roles, so as to monitor informally the information flowing horizontally within the process, Saskatchewan practice conformed, for the most part, to the emphasis on shared information and joint decision making predicted by the lateral relations Crowncorporation organization design. Information-processing and decision-making practices within Saskatchewan's Crown-corporation decision-making process, as predicted by the lateral relations Crown-corporation organization design, resulted in a considerable information advantage for those occupying integrating roles. This distribution of information advantage was no more advantageous to one kind of principal actor than another—depending, of course, on who occupied the integrating roles (a choice made by political actors). One consequence of Saskatchewan's lateral relations Crown-corporation organization design was that it resulted in a proximate balancing of corporate autonomy and institutional control. Some of its other consequences are discussed in chapter 6. 151

Chapter Six Origins and Consequences of CrownCorporation Organization Designs In the provincial chapters, we sought to establish a particular historical context within which to examine how different Crown-corporation organization designs gave rise to different outcomes in the balancing of corporate autonomy and institutional control. But by focusing on our prime analytical task—to demonstrate how these designs resulted in different balancing outcomes—we may have created the impression that such designs were "independent variables," rather than creatures of context. This was not our intent. Our Crown-corporation organization designs might be a potent explanator of behaviour and balancing outcomes within the internal political economy of the Crown-corporation decision-making process. But, for those who consider this to be an overly narrow focus, their reaction might almost be: So what? This chapter is directed at those who are more interested in the context of the analysis than the analysis itself. That is, how did basic factors within the external political economy give rise to the particular features of each Crown-corporation organization design? Why were there differences between them? What were the consequences of these differences? The origins of these Crown-corporation organization designs are in part, at least, ideological. Having said this, we must note that our emphasis is on how governments organize themselves to provide direction to their Crown corporations, not why they chose to create Crown corporations in the first place. This is an important distinction, for there is no shortage of analyses that examine the effects of ideology on the development of government enterprise. In fact, most such analyses are sceptical about the importance of ideology in the calculus of instrument choice. Laux and Molot, for example, point out that "formal ideologies have been chastened" as explanators of why governments opt for or

Origins and Consequences of Crown-Corporation Design against the Crown-corporation instrument. 1 And Trebilcock, cautioning that "in the Canadian context, ideology is not a robust explanator of the emergence of public enterprise," rates it no better than its nemesis, "historical accident."2 Marsha Chandler, however, demonstrates that the partisanship of the government in power can be related to the kinds of Crown corporations it creates. She concludes that provincial governments controlled by social democratic parties (CCF, NDP) turn to state ownership more frequently than other governments, and for different reasons. While non-left governments view public ownership as an "alternative to incentives, subsidies, and the like, in support of the private sector," social democratic governments use Crown corporations as "instruments of economic and social control in line with the goals of redistribution and deconcentration of power."3 Chandler developed several qualifications to the hypothesis that ideology has little to do with the formation of Crown corporations. What I propose to do is develop several qualifications to the hypothesis that ideology has little to do with the management of Crown corporations, broadly defined in terms of how governments organize themselves to provide direction to Crown corporations. I do this by asking what influence Fabian socialist4 concepts of the "institutionalized" Cabinet and Cabinet decision making, often manifest in the ideological headgear of social democratic governments, might have had on the derivation of the "rules of the game" in each of our three jurisdictions. Laux and Molot, while they do not dwell on the Fabian roots of the institutionalized cabinet, indicate that provincial Crown-corporation control and accountability regimes "usually reflect the general level of institutionalization of public administration" within a jurisdiction.5 The ideological impetus to either achieve or avoid the hallmarks of an institutionalized Cabinet is a plausible explanator of the rules of the game prescribing the locus and substance of Crown-corporation decision-making within each jurisdiction. Like the "departmentalized" Cabinet, a Cabinet which has not yet become institutionalized, it is more a "style" of Cabinet decision-making than a "model." But each of these Cabinet decision-making styles, which are present as tendencies within any Cabinet, carry with them vague but pervasive normative ethos. These ethos influence the rules of the game conditioning the reconciliation of the decision perspectives of different kinds of Crown-corporation decision makers. They also condition the reconciliation of the commercial and public-policy objectives of Crown corporations. These Cabinet decision-making styles begin to prescribe, but only by way of extension, the kinds of information processing that might 153

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be used to support the various idealized conceptions of Cabinet-level decision making. It is here that their utility begins to diminish, even as explanators of the rules of the game, much less its practice. It would be necessary to extend these decision-making styles many, many times to yield a fully articulated, prescriptive framework encompassing all information-processing and decision-making behaviour in and around Crown corporations. They can be used, in the positive sense, to make a handful of crude generalizations about the origins of the rules of the game. But they cannot, and were never meant to, take into account positive constraints to decision-making behaviour such as economic circumstances. Nevertheless, it is useful to have some idea of the origins and ethos of these two Cabinet decision-making styles, if for no other reason than simply because they persist.

FABIAN SOCIALISM AND THE INSTITUTIONALIZED CABINET Richards and Pratt, in Prairie Capitalism, devote considerable attention to the development in Saskatchewan of what has come to be known within the literature of public administration in Canada as the "institutionalized" Cabinet.6 They attribute this phenomenon to the influence of the League for Social Reconstruction, a University of Toronto and McGill University-based Fabian socialist "brain trust," which provided philosophical guidance to the CCF movement during the ear lier part of this century. According to Richards and Pratt, the League communicated to the early CCF "an emphasis, to the point of disingenuousness, that the appropriate goal was the elaboration and perfection of the British tradition of cabinet rule." The League envisioned: "neatly designed line and staff organizations, departments, commissions, and nationalized industries with their formal lines of authority explicitly rising to the Cabinet, the Cabinet itself perched at the top of this bureaucratic pyramid. In essence, the preordained role of Cabinet abetted by the ideologically compatible members of a centralized bureaucracy."7 At the heart of this idealized vision of Cabinet decision-making was the idea of "central planning," described by Richards and Pratt as the "Fabian faith in the philosopher-bureaucrat who designs and implements change from the centre." If there were one thing that could do violence to this concept, said these authors. It was ministerial autonomy. Just how this happens is explained by George W. Cadbury, the first head of the Saskatchewan Economic Advisory and Planning Board—one of Canada's first central agencies—and the father of the institutionalized Cabinet in Saskatchewan. "A Cabinet," wrote Cadbury, "is composed of ministers responsible 154

Origins and Consequences of Crown-Corporation Design individually for all sections of government business, and it is their function to represent their departments at Cabinet meetings, to fight for their departmental priorities and policies, and to seek an adequate share of the budget." But, he says, "if the Cabinet stops there and becomes little more than a bargaining centre it will not have a collective view of overall government problems, which is inevitably superior to any view based on a single department's needs."8 T.H. McLeod, who served with the Economic Advisory and Planning Board and later as Saskatchewan's Deputy Provincial Treasurer, describes in Tommy Douglas: The Road To Jerusalem how the fusion of collective responsibility with a tightly integrated central-agency structure transformed the provincial government into a "rational instrument of the highest order." The work of the planners reached into the heart of government, into the Cabinet, the decision-making centre. The Cabinet was surrounded by an array of specialized, professionally staffed agencies, each of them answerable from day to day to a Cabinet committee. The Planning Board provided the overview of the provincial economy. The Government Finance Office watched over the Crown corporations, while the Treasury Board advised Cabinet on the annual budget. The Cabinet Secretariat pulled together the various streams of information and packaged them for the ministers. This high level of coordination and specialization marked a breakthrough in the art of government in Canada. Before this, most governments had been content to operate in a loosely structured, amateurish fashion, reacting to crises or demands from pressure groups as they came up. With experience, the Douglas Cabinet system became highly sophisticated and, with a few minor changes, is still in operation in Saskatchewan today. This method of organization served as a model for other provinces and for Ottawa. The "Saskatchewan Mafia" left its footprint on the public service of Canada.9 The institutionalized Cabinet, after it began to emerge in largerscale eastern Canadian jurisdictions, notably Ottawa, ceased to be solely the preoccupation of Prairie Fabians and attracted somewhat of a broader following. Contemporary renderings, rather than elaborating upon traditions of British Cabinet rule, stress the logistics of executive decision making and the consequences of scale on the institutional structures and processes of government. Richard French, for example, observed at the onset of the institutionalized Cabinet in Ottawa (from the mid-1970s to the early 1980s) that "at the institutional level, the 155

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existing structure of the government became visibly inadequate to meet the rapidly multiplying demands made on government by various elements of society." This made it inevitable, said French, that decision making in government would be altered fundamentally; that policy formulation and coordination would become less personal and more formal; and that institutions would be designed in such a way that "the efforts of a multiplicity of actors would take the place of the experience and savoir faire of a few."10 It is Ottawa, not some remote provincial capital of a bygone era, that epitomized the growth and development of the institutionalized Cabinet, its ascendency over the departmentalized cabinet. As such, our characterizations of these two Cabinet decision-making styles—as "winners" and "losers"—are based on the Ottawa experience. At the Cabinet level in official Ottawa, an interlocking set of Cabinet committees constituted a series of primary decision forums in which "a collective executive decides the objectives, policies, and programs of the government and in which its members take a joint responsibility for the results."" This tilt to collective responsibility, observed James Gillies in Why Business Fails, increased the influence of ministers who thrived on committee work and occupied positions of authority within Cabinet committees. It also increased the influence of the Prime Minister, who controlled the composition and the authority of such committees. These actors, said Gillies, were "winners" in the institutionalized Cabinet. The "losers," at the political level, were ministers who preferred to operate on an individualistic basis, not sharing responsibility or authority or information with colleagues.12 At the bureaucratic level, the emergence of the institutionalized Cabinet brought with it a host of new central agencies to challenge the influence of conventional departmental bureaucracies and existing central agencies. Departments, like ministers, now became "losers," said Gillies. Departmental proposals no longer went directly to Cabinet but to Cabinet committees, where they might be stalled, diluted, or even halted. Gillies also noted that, like departments, deputy ministers could now become "losers." Their function changed from that of policy coordinator and senior policy advisor to that of resources manager. This transformation added to the influence of the "winners," that is, the central agencies.13 Certainly, it was the stature of central agencies within the institutionalized cabinet that most often sparked criticism of this Cabinet decision-making style. Central-agency jurisdictions and mandates, said the critics, were too flexible and difficult to determine. Their structure, being "collegial" rather than "hierarchical," led them to "promote the ultimate integration of the appointed-bureaucratic sector of the government with the elected-executive sector, and seek 156

Origins and Consequences of Crown-Corporation Design the required adjustments in existing constitutional theory for that purpose."14 The "departmentalized" Cabinet, of course, reflects how most observers think Cabinets made decisions prior to the advent of the institutionalized Cabinet. As such, the normative appeal of this style of Cabinet decision-making will always be with us. It derives much of its longevity from the classic notion that Cabinet solidarity depends upon "the informality or unbusinesslike conduct of Cabinet affairs" to achieve a frank consensus among Cabinet members representing diverse portfolios.15 "Individual ministers," in R. MacGregor Dawson's vision of Cabinet decision-making, "accept the responsibility and assume the authority for developing policies in their own areas and administering their own departments." Communication, like coordination, is achieved through informal and confidential channels, not Cabinet committee structures. Strong ministers—the "winners"—run their own departments in their own way, if that is their preference, without much advice, let alone interference, from their colleagues. And collective responsibility is "based on the commonsense notion of confidence in one's colleagues, rather than on the concept of shared knowledge and decision making."16 A corollary of the departmentalized Cabinet is the type of decisionmaking relationship envisioned as occurring between senior elected and appointed officials: strong ministers and strong deputy ministers. In this relationship, said Dawson, "Policy is the sole prerogative of Cabinet, and it is the sole responsibility of the civil service to administer policy once it has been determined." The deputy minister supplies the "technical knowledge," while the minister has the "privilege of overruling his civil servants even though it involves the making of blunders." The minister, "if intelligent, enters into this oppressive atmosphere like a fresh breeze from the sea" and introduces a "different point of view into the department." It is within such a relationship, says Dawson, that the principle of "maintaining democratic control" can be reconciled with that of "securing technical efficiency."17 The oppressive atmosphere referred to by Dawson mirrors a classic model of bureaucracy in which departments embodied the official structure of authority in government and discharged the prime organizational roles. It was departments, to paraphrase Campbell and Szablowski, that possessed exclusive jurisdictions and specialized mandates. Departments enjoyed and protected their own exclusivity from any undue interference or penetration by competing organizations. It was departments, moreover, that developed specialized expertise in particular fields and expected others in government to depend 157

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upon them. The point, of course, is that departments are the "winning" form of organization in the departmentalized Cabinet. Another important point, stressed by Campbell and Szablowski, is that the departmental form of organization "maintains a necessary separation between [its own] structure and [that of] the political executive, and firmly relies upon existing constitutional theory supporting this distinction."18 The stamp of tradition and convention is firmly on the side of the departmentalized Cabinet. It is this stamp that accounts for its enduring appeal and renders it very nearly impervious to obsolescence. Existing accounts of departmentalized and institutionalized Cabinets are useful for improving our understanding of how the two Cabinet decision-making styles affect the conventional bureaucratic (departmental) sector of government. These accounts are less eloquent, however, concerning the effects of the institutionalized Cabinet on the Crown-corporation sector of government. Do Crown corporations— their boards and managements, and the ministers individually responsible for them—become "losers" as the institutionalized Cabinet subsumes the departmentalized Cabinet? Do the central agencies set up to monitor and control Crown-corporation performance become "winners?" What happens to the traditional "arm's-length" relationship between governments and Crown corporations? Richards and Pratt, as well as McLeod, provide a useful account of how Saskatchewan's early institutionalized Cabinet imposed "administrative order" upon its sundry Crown undertakings. 19 In addition, Tupper and Doern, describing Ottawa's institutionalized Cabinet of the 1970s, hint (as noted in Chapter 1) that Crown corporations might logically expect a fate similar to that of conventional departmental bureaucracies. We seek answers to these questions in terms of the rules of the game that originated, in practice, within departmentalized and institutionalized Cabinets at the provincial level in Alberta, Manitoba, and Saskatchewan. A more ambitious comparative analysis might extend these Cabinet decision-making styles to emulate the so-called public- policy decisionmaking models. No great leap of imagination, for example, would be required to think of the departmentalized Cabinet as an emulation of "disjointed incrementalism" and the institutionalized Cabinet as an emulation of "comprehensive rationality." In fact, students of public policy might more instinctively think of these Cabinet decision-making styles as manifestations of one or another broader policy model, than as somehow constituting self-standing phenomena. G. B. Doern and Richard W. Phidd, in Canadian Public Policy, argue that the likelihood of such models being used to generate theories that both "explain 158

Origins and Consequences of Crown-Corporation Design behaviour and allow us to predict" is doubtful; indeed, they assert that the most likely outcome of their application would be "a healthy form of mental gymnastics."20 The counter-argument, of course, is that although such models—at least their more tangible manifestations— might be normative, they nevertheless permit a certain amount of explanation. Another layer of institutional analysis also suggests itself—a tack that might be blended into a more comprehensive approach linking public-policy models with political culture and, indeed, political philosophy. Recognizing that my own approach will probably raise more questions for Canadian political scientists than it will resolve, I invite further investigation using this avenue of enquiry by positing that the origins of the "rules of the game" are best understood in normative terms, even if their consequences can be understood in more positive terms. A government's institutional philosophy may derive from its broader ideological orientation—an argument I propose to identify, but leave to others to perfect.

CABINET DECISION-MAKING STYLES AND THE RULES OF THE GAME Rules of the game prescribing the locus and substance of Crowncorporation decision-making in Alberta, Manitoba, and Saskatchewan bear the footprints of either the departmentalized or institutionalized Cabinet decision-making style. Pinpointing the locus of decision is a function of the relative emphasis placed upon collective, as distinct from individual, ministerial responsibility. In other words, it is a rule of the game reflecting the emergence of cabinet committees or central agencies (or both) that are dedicated exclusively to the monitoring and control of Crown corporations. As for substance of decision, the institutionalized cabinet gives rise to a modified interpretation of the arm's-length relationship between governments and Crown corporations. Quite simply, the rules of the game act to extend the "shortlist" of decisions that the government prefers to hold to itself rather than delegate to individual Crown corporations. Together, the rules of the game governing the locus and substance of Crown-corporation decision-making evolved into rudimentary models of managerial direction for Crown corporations, all of which differed quite considerably in Alberta, Manitoba, and Saskatchewan. Historically, the rules of the game of Alberta's self-contained organization design reflected the clear preference of Alberta politicians for a departmentalized, rather than an institutionalized, Cabinet decisionmaking style. Alberta never experienced a social democratic government and the traditions, conventions, and central bureaucratic 159

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machinery of a Fabian institutionalized Cabinet were conspicuously absent. The general level of institutionalization of public administration, to use Laux and Molot's term, was minimal, within both the conventional bureaucratic sector and the Crown-corporation sector. Manitoba and Saskatchewan, by way of contrast, had social democratic governments during most of the period investigated; ideological preferences for an institutionalized Cabinet decision-making style were much stronger than in Alberta. In Manitoba, this impetus gave rise to vertical-information-systems rules; in Saskatchewan, it gave rise to lateral relations rules—a point we return to later. In both cases, however, the rules of the game prescribed more institutionalization of Crown-corporation decision making than in Alberta. It is important to keep in mind, of course, that these three provinces are small-scale jurisdictions, with administrative infrastructures and Crown-corporation sectors of similar magnitude. If differences in scale were the only explanator of the emergence of the institutionalized Cabinet, there would be no examples of this phenomenon within any of these jurisdictions. Locus and Substance of Decision In Alberta, the rules of the game placed much more emphasis on the application of conventions of individual rather than collective ministerial responsibility and prerogative to Crown corporations. The central locus of Crown-corporation decision making consisted of interchangeable cabinet-level decision forums; that is, no cabinet committee or central agency devoted itself exclusively to deliberating upon or overseeing Crown-corporation issues. As such, the centre of gravity of the Alberta Crown-corporation decision-making process was located more firmly within the agency of the minister than the agency of the Cabinet. Indeed, it was unambiguously located within the boards of directors of the individual Crown corporations. This locus of decision was linked to the central institutional framework of the government by means of conventions of individual ministerial responsibility and the Treasury-supervised budget-review process, the closest thing—in Alberta—to an institutionalized central-agency process. Alberta politicians, staunch proponents of a traditional departmentalized cabinet, prescribed a strict arm's-length relationship between the government and its Crown corporations. A corollary of this prescription, actually a rudimentary model of managerial direction for Alberta Crown corporations, purported to locate "policy" decisions within the central institutional framework of the government and 160

Origins and Consequences of Crown-Corporation Design "administrative" decisions within the individual Crown corporations. Ideally, Alberta politicians wanted to locate "policy" decisions governing the formation, mandates, and certain major investments of Crown corporations within the central institutional framework of the government, while delegating all other decisions — presumably "administrative" decisions—to individual corporate boards. In this rudimentary model of managerial direction, the shortest list of decisions of all jurisdictions investigated was located within the central institutional framework of the government. In Manitoba, by way of contrast, the rules of the game were clearly oriented to institutionalizing still further the Crown-corporation decision-making process. This was to be accomplished, in the classic fashion of the institutionalized Cabinet, by firmly applying conventions of collective ministerial responsibility and central-agency machinery to Crown corporations. The central locus of Crown-corporation decision making consisted of a Cabinet committee —The Economic Resources Investment Committee (ERIC) —which functioned, parttime, as a collective, ministerial decision forum for the deliberation of Crown-corporation issues. The Department of Crown Investments (DCI), a central agency established expressly to oversee Crowncorporation activities and decisions, provided bureaucratic support to this Cabinet committee. Together, they constituted the centre of gravity of the Manitoba Crown-corporation decision-making process, locating it ever more firmly within the agency of the Cabinet than that of the minister. Boards of directors of Crown corporations were linked to the central institutional framework of the government by means of conventions of individual ministerial responsibility. But they were also linked to the centre by means of the DCi-superintended, corporateplanning process, as well as the practice of having DCI officials serve on Crown-corporation boards. Such an approach involved an ambitious array of institutionalized central-agency processes. Manitoba politicians, unlike their Alberta counterparts, eschewed the traditional arm's-length relationship between the government and its Crown corporations. Nor did they seek to make distinctions between "policy" and "administration" in Crown-corporation decision-making. In fact, they advanced no authoritative conceptual distinctions with which to demarcate the substance of decisions within the government/ Crown-corporation decision-making relationship. At a minimum, Manitoba politicians wanted to locate decisions governing the formation, mandates, and investments of Crown corporations within the central institutional framework of the government. However, because they also sought to locate the development and articulation of a comprehensive 161

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administrative-policy framework for Crown corporations within the central decision locus, the substance of the decisions delegated to individual Crown corporations was unclear. In this rudimentary model of managerial direction, the longest (in fact, an indeterminate) list of decisions of all jurisdictions investigated was located within the central institutional framework of the government. In Saskatchewan, the rules of the game prescribing the locus and substance of Crown-corporation decision making emphasized the firm application of both collective and individual ministerial responsibility to Crown corporations. Artifacts of an archetypically institutionalized Cabinet, these rules—although applied more meticulously by the Blakeney than the Devine administration—did not change appreciably over time. The central locus of Crown-corporation decision making—a Cabinet committee comprising the board of directors of a Crowncorporation holding company—was supported in its deliberations by the administrative apparatus of the holding company, the corporate equivalent of a central agency. The centre of gravity of the Saskatchewan Crown-corporation decision-making process alternated somewhat between the holding company and individual Crown-corporation boards, depending on where the government of the day wanted it located. But its location—despite the preferences of the Blakeney and Devine governments for greater or lesser institutionalization—became no more firmly established over time, either within the agency of the minister or the agency of the Cabinet. Individual corporate boards were linked to the holding-company board by means of a capitalrationing process and a series of integrating roles that located certain kinds of principal actors (including politicians) within both these decision forums. Although all this may have represented a similar, perhaps even greater, level of institutionalization than that found in Manitoba, it was an institutionalization of a different kind. Saskatchewan politicians, like their Manitoba counterparts, rejected the notion of a traditional arm's-length relationship. Unlike Manitoba politicians, however, they employed conceptual distinctions inspired by the M-Form to differentiate between "strategic" and "operational" Crown-corporation decision making. This rudimentary model of managerial direction was initiated, oddly enough, by the Blakeney administration. An incongruous "corporatist" flavour was thus appended to its otherwise orthodox Fabian, institutionalized, Cabinet decisionmaking style. Used, for the most part, by both the Blakeney and Devine governments, it purported to locate "strategic" decisions governing the formation, mandates, and investments of Crown corporations within the holding company, while delegating all other decisions, presumably "operational" decisions, to individual Crown corporations. 162

Origins and Consequences of Crown-Corporation Design The Blakeney government located a longer list of decisions within the holding company than the Devine government, which preferred a less institutionalized Crown-corporation decision-making process. This list included industrial relations, legal, and personnel policy, but stopped well short of including corporate administrative policy. The Devine government, by dropping these decisions from its short-list, partially deinstitutionalized Crown-corporation decision making. However, the short-list used by either the Blakeney or the Devine government—relative to those used by Alberta and Manitoba—could be termed "intermediate" in length. In fact, rules of the game prescribing the locus and substance of Crown-corporation decision making "tilted" somewhat with the ideological imperatives of the Devine and Blakeney governments. Nevertheless, the impetus for either an institutionalized or a departmentalized Cabinet decision-making style did not manifest itself in the widely divergent decision rules conditioning the interactions and maximizing behaviours of Crown-corporation decision makers in Alberta and Manitoba. Reconciliations: Decision Perspectives and Objectives If the ideological preferences for either a departmentalized or an institutionalized Cabinet decision-making style help to explain the origins of the rules of the game prescribing the locus and substance of Crown-corporation decision making, can they also be used to explain the origins of other rules of the game? Can they explain, for example, the game rules that condition the reconciliation of the decision perspectives of various kinds of Crown-corporation decision makers, as well as the public-policy and commercial objectives of Crown corporations? The answer, based on the cases of Alberta, Manitoba, and Saskatchewan, is affirmative; but only partly affirmative. Indeed, these preferences are a plausible explanator of the various levels of institutionalization of Crown-corporation decision making. They are not, however, as robust an explanator of the different kinds of institutionalization. In the end, the process was much more institutionalized in both Manitoba and Saskatchewan than in Alberta, yet very different kinds of Crown-corporation organization designs emerged in Manitoba and Saskatchewan. The game rules conditioning the reconciliation of decision perspectives and Crown-corporation objectives are certainly influenced by the level of institutionalization of the Crown-corporation decision-making process. Moreover, the preferred locus, or centre of gravity, of the Crown-corporation decision-making process—whether based within central agencies or individual Crown corporations—has profoundly 163

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influenced the determining of such reconciliations. So do the patterns of collegia!ity, which differ significantly between the two styles of Cabinet decision making and set the stage for information sharing and exchange relationships among different kinds of Crown-corporation decision makers. The ways in which the rules of the game were applied to Crown corporations in the form of ownership prerogatives cannot, however, be explained solely in terms of levels of institutionalization. Other variables, such as economic constraints on capital resource allocation and, for that matter, unique political considerations, were also partly responsible for differences in the evolution of provincial Crown-corporation organizational designs. In Alberta, the centre of gravity of the Crown-corporation decisionmaking process was concentrated more within individual corporate boards than the central institutional framework of the government. This locus of decision placed fewer decision constraints on corporate, as opposed to bureaucratic, actors and was less indifferent to the commercial objectives of Crown corporations than their public-policy objectives. At the individual board level, the decision perspectives of bureaucratic actors seldom came into play; and, in the case of the corporate enterprise group, never. Although it is not clear exactly how differences in the decision perspectives of corporate and political actors were made explicit and resolved at the board level, the liaison between designated ministers and board chairmen constituted a stable and predictable mode of interaction between these two kinds of actors. For Crown corporations in the corporate enterprise group, the reconciliation of commercial and public-policy objectives was axiomatic; these objectives, subject to a handful of broad policy caveats, were assumed to be synonymous. For Crown corporations in the conventional Crown corporation sector, however, commercial objectives were more obviously constrained by substantive public-policy objectives. The rules of the game were more explicit and were applied, for the most part, in or around the central locus of decision. Because the cabinet committees and central-agency mechanisms of the institutionalized cabinet never took root in Alberta, bureaucratic actors (Treasury officials) did not benefit from a collegial, decisionmaking relationship with politicians. Thus constrained, Treasury officials employed a consensual, non-adversarial mode of reconciliation in their interactions with corporate actors, themselves constrained by the need for budgetary appropriations. This "calculus of consent" was mandated by politicians who preferred, in the tradition of the departmentalized cabinet, a series of unitary recommendations for such and such a decision, rather than a cafeteria of discrete policy options forged 164

Origins and Consequences of Crown-Corporation Design within the adversarial relationships so characteristic of a more fully articulated, central-agency environment. In addition to obfuscating any competitive zeal Treasury officials and corporate actors might have employed in the pursuit of their own objectives, this mode of reconciliation mirrored deeply held anxieties that any further institutionalization of Crown-corporation decision making would almost surely result in "antipathies" among the various different kinds of Crown-corporation decision makers. These anxieties manifested themselves in the form of resistance to centralized modes of information collection and processing dedicated exclusively to the monitoring of Crown-corporation performance. They manifested themselves, moreover, in the absence of any particularly competitive or rigorous Crown-corporation capital-resource-allocation process. In the case of the corporate enterprise group, the application of ownership prerogatives consisted solely of the imposition of policy caveats. In the case of the conventional Crown-corporation sector, however, the application of ownership prerogatives more closely resembled approaches employed by other jurisdictions, such as the review and approval of major investment proposals. This review-and-approval process was based on a case-by-case approach to investment decision making, certainly not on any explicit capital-rationing principle. Although it can be viewed, for the most part, as an outgrowth of Alberta's consensual, departmentalized Cabinet decision-making style, it probably owed at least as much of its continued existence to exogenous economic factors. Alberta, during most of the period investigated, was rich in resource revenues; a fact reflected in the emergence and growth of the Alberta Heritage Savings and Trust fund. Economic constraints on Crowncorporation capital-resource-allocation were minimal, while pressures for any strict form of capital rationing were almost hypothetical. In both political and economic terms, Alberta required nothing more elaborate than a self-contained Crown-corporation organization design. Although these factors might not explain the precise origins of the design, they do explain the lack of any tangible incentive to recast it. In Manitoba, the rules of the game conditioning the reconciliation of decision perspectives and Crown-corporation objectives evolved within a troubled central-agency apparatus in which the division of decision-making responsibilities was contentious and unclear. The rules mirrored the chronicle of a government that aspired to make the transition from a departmentalized to an institutionalized Cabinet but did not have the discipline to do so. At the individual board level, no 165

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clear norms governed interactions among the various kinds of Crowncorporation decision makers; deeply held anxieties that corporate actors might somehow undermine the independence of Crown-corporation boards were equalled only by fears that politicians might do the same. All this meant that bureaucratic actors (DCI officials), who doubled as members of most Crown-corporation boards, were the only principal actors relatively free to act as advocates of their own decision perspective at the board level. This constrained the capacity of Crowncorporation boards to function as primary decision forums, forums in which a full range of decision perspectives and Crown-corporation objectives could be aired—much less effectively reconciled—and rules of the game conditioning such reconciliations were employed, for the most part, within the central decision locus: the ERIC/DCI nexus. The DCI officials—who performed routine staff analysis for ERIC, comprised a staff secretariat to ERIC on the Crown-corporation side of its workload, and were present at all ERIC'S Crown-corporation deliberations—were the beneficiaries of a collegial decision-making relationship with ERIC ministers. They were constrained, however, by a mandate that cast DCI as a purveyor of information, rather than an allocator of resources. Mindful, too, of the Schreyer government's turbulent attempt to superimpose an institutionalized Cabinet decisionmaking style on a traditional bureaucracy, DCI officials were at least initially cautious in their interactions with Crown-corporation management. For the most part, the DCI'S corporate planning and capital budgetary initiatives were accepted by corporate actors as one of the unavoidable decision constraints of an ascendent, institutionalized Cabinet. Their corporate administrative-policy initiatives, however, were strongly resisted by corporate actors as a superfluous, unjustified decision constraint. In fact, the unpopularity of the latter initiatives sparked insurgency on the part of corporate actors and some non-ERic Cabinet ministers, whose goal was the restoration of a departmentalized Cabinet decision-making style. The Manitoba Crown-corporation decisionmaking process thus became characterized by "culture gaps." These gaps rendered differences in decision perspectives explicit to the point of being extremely difficult to resolve, leading to precisely the sort of impasse feared by opponents of increased institutionalization in Alberta. The ERIC/DCI nexus, established as much to avoid scandal and impropriety on the part of Crown corporations as to effect improvements in their investment performance, imposed fewer decision constraints on bureaucratic, as opposed to corporate, actors, and was less indifferent to public-policy, as opposed to commercial, objectives of 166

Origins and Consequences of Crown-Corporation Design Crown corporations. Its application of the government's ownership prerogatives to Crown corporations consisted of reviewing and approving corporate strategic plans and investment proposals, as well as developing and articulating a comprehensive administrative-policy framework for Crown corporations. Although the DCI corporateplanning process succeeded in eliminating many distortions within the case-by-case approach adopted previously by Manitoba governments vis-a-vis Crown-corporation capital resource-allocation, this approach ultimately based itself more on the prevention of administrative malfeasance than on any explicit capital-rationing principle. The ERIC/DCI experiment, less the logical outgrowth of an institutionalized Cabinet decision-making style than the outcome of a zealous but abortive attempt to emulate one, at least reflected the reality that Manitoba's commercial Crown corporations—compared, that is, to those of Alberta or Saskatchewan—were neither as much of a force in the provincial economy nor anywhere near as capital-intensive. It seemed that the visibility of these companies derived primarily from incompetence and scandal, while the associated risks were inherently more political than economic. Born more of political than economic necessity, Manitoba's vertical-information-systems Crown-corporation organization design lasted less than five years, at least in the form of a government department. This, of course, does not deny the potential viability of such a design, intelligently administered. In Saskatchewan, rules of the game conditioning the reconciliation of decision perspectives and Crown-corporation objectives varied in their application—from administration to administration —with the deployment of integrating roles. The Blakeney government, in the tradition of the Douglas/Lloyd institutionalized Cabinet, constrained the domination of Crown-corporation boards by Crown-corporation management —the integrating roles being occupied by ministerial board chairmen and holding-company staff serving as corporate secretaries. The Devine government, convinced these practices had "bureaucratized" board-level decision making, modified them by having ministers serve as vice-chairmen and by replacing corporate secretaries with "civilian" chairmen. Although this substitution of integrating roles partially "de-bureaucratized" Crown-corporation decision making at the board level, it did not eliminate the institutionalization inherent in the use of integrating roles. In both the Devine and Blakeney governments, individual Crown-corporation boards— linked to the holding-company board by such integrating roles — served as primary decision forums in which decision perspectives and Crowncorporation objectives underwent their initial reconciliation. The game rules conditioning the oversight of these reconciliations 167

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came into play within the central locus of decision: the holdingcompany board. During the Blakeney administration, holding-company staff—especially corporate secretaries—were the beneficiaries of a collegial decision-making relationship, with ministers serving on the board of directors of the holding company. The Devine government, by eliminating corporate secretaries and by changing the composition of the holding-company board to include civilian chairmen, sharply curtailed the amount of ministerial collegiality available. This reduced the "reach" of the holding company and holding-company staff, but not to the point of diminishing the analytic support role of these central-bureaucratic-monitoring agents during the annual capitalrationing exercise. As long as holding-company staff restricted themselves—in the fashion of an "investment banker"—to the articulation of capitalrationing constraints, this role was accepted by corporate actors as an unavoidable decision constraint. But if holding-company staff, in the view of corporate actors, articulated decision constraints extrinsic to the basic capital-rationing role of the holding company, they were accused of indulging in "shadow-management," a charge more frequently levelled during the Blakeney than Devine administration. To the extent that neither of these roles—the "banker" or the "shadowmanager"— was allowed, over time, to completely eclipse the other, the decision perspectives of all relevant actors could be taken into account at various levels of the process and the rules of the game were no less indifferent to the public-policy objectives of Crown corporations than to their commercial objectives. The rules of the game in Saskatchewan, despite the Devine and Blakeney governments' ideological preferences for different levels of institutionalization, prescribed — above all — a tightly integrated Crown-corporation decision-making process. They also prescribed, unlike the rules of the game in Manitoba or Alberta, a core of "integrators" to guide a serial process of reconciliation, beginning at the individual board level and extending to the central locus of decision. Although this whole process was made possible by the innovation of integrating roles, that innovation can by no stretch of the imagination be directly attributed to ideological explanators. Nor is ideology a robust explanator of why it was only in Saskatchewan, of all the jurisdictions investigated, that governments of widely divergent ideological persuasions applied their ownership prerogatives to Crown corporations espousing an explicit capital-rationing principle. Given its essentially agrarian economy, lacking markets potent enough to incubate very many conventional corporate head offices, its sporadic resource booms both sparked and extinguished by forces 168

Origins and Consequences of Crown-Corporation Design beyond its control, Saskatchewan has known more than once in this century what it is like to be "dirt-poor." The very real spectre of economic scarcity looms significantly as a positive explanator of the cohesive integration and strict capital rationing at the heart of the Saskatchewan Crown-corporation organization design. Stark economic constraints to Crown-corporation capital resource-allocation were as much a stimulus to the innovations of Saskatchewan's Fabian organization designers as the institutional symmetry comprising their own normative vision of public-policy decision making. Born as much of economic as political necessity, Saskatchewan's lateral relations Crowncorporation organization design stood the test of time. This observation is perhaps more eloquent on the consequences of the design than its origins. Nevertheless, the design's capacity to facilitate reconciliations between the commercial and public-policy objectives of Crown corporations, by very different kinds of politicians, during very different kinds of economic circumstances, is an outcome that would please, although not necessarily surprise, its Fabian architects. CONSEQUENCES OF CROWN-CORPORATION ORGANIZATION DESIGNS The consequences of Crown-corporation organization designs, at least their internal operating consequences, are more amenable to positive analysis than their origins. Once the rules of the game are derived, it is possible—as was done in the provincial chapters—to demonstrate how they constrain the maximizing behaviours of different kinds of principal actors to yield different outcomes in terms of the balancing of corporate autonomy and institutional control. This, we have done. There is no need to be repetitive. It is important to note, however, that these balancing outcomes, critical as they are to the autonomy and control issue, are not the sole outcomes of Crown-corporation organization designs. They may well, for example, influence efficiency outcomes; the determination of which, of course, is the province of a normative analysis. We can, however, determine by way of positive analysis —and these are the consequences we will focus on—that the dynamics of strategic behaviour within a Crown-corporation organization design may act to reinforce, destabilize, or otherwise affect the operation of the design in practice. Once these effects are known, it becomes easier to speculate as to their broader consequences at the societal level. Such consequences, however, are elusive, contradictory, and rooted at least as much within public perceptions of decisionmaking behaviour in and around Crown corporations as the behaviour itself. Normative, even subjective, elements may intrude, and the outer limits of positive analysis are illuminated. 169

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Alberta In Alberta, the interplay of selective responsibility and selective rationality, as well as the positioning of central-bureaucratic-monitoring agents within this continuum of strategic behaviour, reinforced the operation of the province's self-contained Crown-corporation organization design. In the case of the corporate enterprise group, the practice of selective responsibility by politicians was nearly sanctified, while the practice of selective rationality by corporate actors was almost purely discretionary. The information requirements of politicians did not extend beyond their being satisfied that these firms were financially self-sustaining and did not violate the government's policy caveats. In operational terms, this arrangement called for neither a central information collection-and-processing resource nor any formal or extensive information sharing. Rather, it called for a simple and direct exchangerelationship between corporate and political actors, one in which the virtual exclusion of central-bureaucratic-monitoring agents was perfectly consistent with the operation of a purely self contained Crown corporation organization design, in practice. Very few discontinuities or "surprises" arose from the interplay of selective responsibility and selective rationality in the operation of Alberta's self-contained organization design. In practice, the exchangerelationships between political and corporate actors equipped the political actors with the information they required to use Crown corporations as instruments of vote maximization. At the same time, these relationships posed minimal constraints on the corporate actors' ability to maximize their own managerial discretion and relative autonomy. The incentives of political and corporate actors were relatively harmonized, even after taking into account the positioning of centralbureaucratic-monitoring agents in the case of Crown corporations within the conventional Crown-corporation sector. In this case, Alberta politicians offered enhanced managerial discretion and relative autonomy to corporate actors in exchange for enhanced corporate sensitivity to their own public-policy objectives and political ambitions. In fact, they extended the opportunity to practise selective rationality. Treasury officials, the only bureaucratic actors to come even intermittently close to the Alberta Crown-corporation decision-making process, did not seek to aggrandize the exchange-relationships that political and corporate actors had fashioned. Their modest information collection and processing role—to devise "rules of thumb," perform "thoughtful cross-examinations" of Crown-corporation investment proposals, and personify the institutional capacity to occasionally say 170

Origins and Consequences of Crown-Corporation Design "no" to such proposals—carried with it a certain amount of policy influence—albeit of a passive, subtle, and traditional, rather than an active and directional, nature. Treasury officials, in fact, were leading proponents of the "calculus of consent" ethos said by most participants to have characterized the Alberta Crown-corporation decision-making process. They argued, as did political and corporate actors, that increased "bureaucratization" would result in "antipathies" among different kinds of Crown-corporation decision makers. The fact that antipathies were constrained to the point of being nearly non-existent was, of course, an important internal operating consequence of Alberta's self-contained Crown-corporation organization design. The incentives of the various kinds of principal actors accorded well with each other, and the design held together with very little clamour or disruption. A critic, however, might well ask whether a broader consequence of this calculus of consent was not that it inhibited the effective monitoring and control of Crown-corporation performance to the point that the unique agency problems of the Crown-corporation instrument were not being adequately addressed. This is a normative question. It was raised many times by the media in the form of allegations that firms within the corporate enterprise group were "pampered" or accorded "special treatment " by the Alberta government.21 But no evidence of wrongdoing ever surfaced; nor were examples ever found of those responsible for running Alberta Crown corporations ever having actually plundered the wealth of the firm or its governmental proprietors. A critic of Alberta's self-contained Crown-corporation organization design might also ask whether a broader consequence of this design was that it nurtured a popular public perception that Crown corporations were not actually a part of the government; that is, that there was, in effect, no distinct Crown-corporation sector within the administrative infrastructure of the Alberta government. Alberta politicians, convinced that they reflected an abiding public dislike of government intervention in general and of Crown corporations in particular, were reluctant to claim much credit for the activities of Crown corporations; they feared that overt credit-claiming might be interpreted by the electorate as an acknowledgment of the proliferation of the instrument. Thus, whenever they decided that government enterprise was an appropriate means of achieving a compelling or popular public-policy objective, they would structure their action in such a way that, while their use of the Crowncorporation instrument was not explicit, their ability to claim credit for it was not substantially impaired. On the one hand, the instrument was draped within the protective coloration of something akin to a conventional bureaucratic instrument: a "commission," for example; or a 171

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"board," "foundation," "authority," or the like. On the other hand, it was presented as a unique ownership situation, apparently indigenous to Alberta, in which companies were almost incidentally governmentowned yet expected to operate just like a private company. What Alberta politicians might well have concluded, judging from their behaviour, is that the voting public reacts against the form, rather than the actual extent, of government intervention. Indeed, if a government-owned industry, such as Alberta's Treasury Branch system, was not perceived as a "Crown corporation"—with all the perplexing contradictions inherent to that particular policy instrument—what was to stop the proprietors of Canada's only government-owned retail-banking network from proclaiming, "What Crown corporations?" At least in part because of their implicit use of the Crown-corporation instrument, no strong public perception emerged during the period investigated that there was anything within the Alberta government resembling a distinct Crown-corporation sector; that is, a sector unto itself. Indeed, such a perception might have constituted the ultimate circumstance for Crown corporations to have maximized their corporate autonomy. It might also have denoted a basic consensus as to the purposes of government and the role of Crown corporations within it. At any rate, the perception has been a durable phenomenon, one that has persisted. But how, one might ask, would it have fared had Albertans, during the province's economic downturn of the mid-1980s, been more obviously aware of the fact that the most sacred of Alberta's political icons—the Alberta Heritage Savings Trust Fund—was composed, for the most part, of debentures issued to cover Alberta Crown-corporation debt? Indeed, as of 31 March 1986, loans to Alberta's Crown corporations accounted for nearly two-thirds of the fund's assets ($8.03 billion of $15.1 billion, less $2.4 billion in "deemed assets," equals 65.3%).22 Naturally, the principal actors within the Alberta Crowncorporation decision-making process had to be well aware of this fact. But such knowledge apparently did not spark any move toward a more tightly monitored, Crown-corporation capital-resource-allocation process. Instead, more was heard of a competitor logic. This logic, alluded to on more than one occasion by Premier Donald Getty, proposed to privatize Alberta Government Telephones, a Crown corporation whose accumulated borrowing from the Alberta Heritage Fund exceeded more than 75 per cent of its net book assets.23 Manitoba In Manitoba, the dynamics of strategic behaviour had the opposite consequences to those of Alberta. Constantly on the defence over 172

Origins and Consequences of Crown-Corporation Design Crown-corporation issues and with "damage control" the most plausible stratagem for containing the political costs of the instrument, Manitoba politicians were convinced that they had unique and formidable information requirements. To avail themselves of the analytical overviews they wanted from their vertical-information-systems Crowncorporation organization design, they fashioned a dominant exchangerelationship between themselves and central-bureaucratic-monitoring agents (DCI officials). In exchange for this information, Manitoba politicians offered these bureaucratic actors a relatively unconstrained opportunity to maximize their own policy influence within the Crowncorporation decision-making process. This exchange-relationship was quite consistent with the general idea of having a vertical-informationsystems Crown-corporation organization design. But the ensuing interplay of selective responsibility and selective rationality, as well as the placement of central-bureaucratic-monitoring agents within this spectrum of strategic behaviour, had the effect of destabilizing this design in practice. Unlike Alberta, Manitoba's Crown-corporationDDDDDDDDDDD process experienced a continuous stream of "surprises." Politicians, faced with incompetent or criminal behaviour on the part of corporate actors, reacted to the surprise with outright denials of ministerial responsibility, attempting to shift the blame directly onto corporate actors. Wanting to practise only selective responsibility, they needed a rationale with which to distance themselves from the comprehensive responsibility implied by the vertical-information-systems Crowncorporation organization design. Bureaucratic actors, seeking to maximize their own policy influence by providing such a rationale, armed political actors with the dubious proposition that ministers need not be responsible for the "administrative kinds of things" that happen in and around Crown corporations. This argument explains much of the impetus for the development and articulation of a comprehensive administrative-policy framework for Manitoba Crown corporations. Approved by politicians, enforced by bureaucratic actors, but anathema to corporate actors, this undertaking had the clear operational consequence of exacerbating antipathies among Crown-corporation decision makers, and between corporate actors and centralbureaucratic-monitoring agents in particular. Convinced that their (prevertical information systems) information advantage had been appropriated—not simply neutralized—a minority of corporate actors set out to restore their managerial discretion and relative autonomy by practising a grim variant of selective rationality. In this clandestine form of strategic behaviour, they enlisted as tacit collaborators a minority of political actors (designated ministers) who resisted the 173

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aggrandizement of a traditional, departmentalized style of Cabinet decision-making by the institutionalization of the ERIC/DCI nexus. The ensuing clamour and disruption, in which I would include the infamous MTS/MTX affair, was the most obvious consequence of Manitoba's experiment with the vertical-information-systems Crown-corporation organization design. Added to that, of course, was the dissolution of the Department of Crown Investments. Given that the incentives of the various kinds of principal actors could not be made to accord with one another, the institutional mainspring of the design simply collapsed. More fundamentally, it might be asked if a broader consequence of the design—and the resulting excessive degree of monitoring—was that Manitoba Crown corporations were ultimately denied the minimum amount of autonomy required to reasonably qualify as instruments of government enterprise. Certainly, the "enterprise" component of government enterprise was seen by Manitoba politicians as secondary to the containment of political risk. Did the "bureaucratization" of the Manitoba Crown-corporation decision-making process, epitomized by the government's emphasis on corporate administrative policy, mean that Crown corporations had little more autonomy than conventional departmental bureaucracies? Manitoba Crown corporations were not subject to exactly the same administrative controls as normally reserved for the non-corporate sector of government. But they were subject to the constraints of an approach to the organization and direction of Crown corporations that not only did not recognize any arm's-length relationship, but that contained no authoritative distinctions as to what decisions ought to be made by the government, on the one hand, and by Crown corporations, on the other. The fact that the information taxonomies of central-bureaucratic-monitoring agents extended to the minutiae of corporate administrative policy, as well as to broader strategic planning and investment initiatives, lent substance to the unmistakable impression that the Manitoba government sought to apply its General Manual of Administration to Manitoba Crown corporations. Indeed, it is difficult to reject the conclusion that the Manitoba government, during its experiment with the vertical-information-systems Crowncorporation organization design, became somewhat obsessed with some of the more trivial aspects of the unique agency problems of the Crown-corporation instrument. But this preoccupation with administrative probity and propriety did not forestall the plundering of the "wealth of the firm" by Crown-corporation management. The litany of petty (and some not so petty) larceny and administrative malfeasance that scandalized Manitoba's commercial Crown corporations 174

Origins and Consequences of Crown-Corporation Design during the ERIC/DCI era reinforced, if not magnified, most Manitobans' perception that these companies constituted not only a unique sector of the government, but one that was also inherently ineffectual and corrupt. In the aftermath of the traumatic MTS/MTX affair, the Pawley government announced it was replacing the Department of Crown Investments with a holding company for Manitoba Crown corporations, the Manitoba Public Investments Corporation.24 As in Saskatchewan, the mandate of the new holding company was financial in scope. Also, as in Saskatchewan, the board of directors of the holding company was a self-standing Cabinet committee. Unlike Saskatchewan, Manitoba required Crown-corporation boards to establish committees on planning and auditing and obliged public utilities to hold annual accountability meetings with their customers. But this initiative failed to address either the linkage of designated ministers to individual Crown-corporation boards or their linkage to the board of directors of the holding company. Although it reflected the penchant of the Pawley administration for a multitude of accountability devices, it did not seek to rectify the uneasy balancing of collective and individual ministerial responsibility for Crown corporations that permeated almost every aspect of Crown corporation decision making during the DCI era. The consequences of this extension of the vertical-informationsysteins Crown-corporation organization design are not yet known. What is known is that Manitoba politicians chose to domicile what was left of this design within a corporate, rather than a departmental, organizational form. This they did without obviously taking into account the dynamics of strategic behaviour that had acted to destabilize the design in the first place. A vertical-information-systems Crown-corporation organization design, by all indications, requires a tightly integrated, institutionalized, Cabinet decision-making style. If Manitoba politicians again fail to make such a transition, they will most likely find themselves as the proprietors of a failed vertical information system domiciled within a corporate, as opposed to a departmental, form of organization. Saskatchewan In Saskatchewan, the interplay of selective responsibility and selective rationality, and the positioning of central-bureaucratic-monitoring agents within this spectrum of strategic behaviour, neither reinforced nor destabilized the operation of the province's lateral relations Crowncorporation organization design, in practice. Not, that is, in any dramatic fashion. Rather, the dynamics of strategic behaviour acted to 175

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"tilt" the operation of the design ever so slightly. That is, it progressed from an implicit, vertical information systems orientation in the Blakeney government, to an implicit, self-contained units orientation in the Devine government. This "tilting" effect derived not so much from variations in the practice of selective responsibility and selective rationality as from variations in the identity of the occupants of the integrating roles. In the Blakeney government, holding-company staff occupied integrating roles other than those held by politicians. They were in a position to monitor information flowing horizontally within the informal Crown-corporation decision-making process, as well as information flowing vertically within the formal Crown-corporation decision-making process. This led corporate actors to complain of "shadow management" on the part of the holding company and its staff. But their situation was not all that disadvantaged when compared to that of their counterparts within Manitoba's vertical-informationsystems Crown-corporation organization design. In the Devine government, the integrating roles previously occupied by holding-company staff were occupied by civilian board chairmen. The two streams of information—horizontal and vertical—ceased to intersect at the staff level of the holding company. This modification in the operation of the design reduced the information advantage of central-bureaucraticmonitoring agents and prompted them to speculate that this "tilt" in the operation of the lateral relations Crown-corporation organization design worked to the advantage of corporate actors. Yet they retained a monitoring role of very substantial proportions compared to the much more modest one assigned to their counterparts within Alberta's self-contained Crown-corporation organization design. The fact that the operation of the design tilted somewhat, depending on whether the occupants of integrating roles were bureaucratic or corporate actors, required a fair amount of strategic adaptation on their part at the time of the actual tilting. Such strategic adaptation, however, was temporal. It had no lasting or dramatic consequences on the operation of the lateral relations Crown-corporation organization design, in practice: except, perhaps, for those who were incapable of strategic adaptation while the design was tilting from one implicit orientation to another. This is not to say that Saskatchewan's use of integrating roles to monitor strategic behaviour horizontally within the informal Crown-corporation decision-making process did not have other consequences. One undeniable result of using the integrating roles and "trip wires" of this Crown-corporation organization design was a lingering confusion over the precise locus of formal authority within the design, regardless of direction of tilt at the time. 176

Origins and Consequences of Crown-Corporation Design In both the Devine and Blakeney governments, the use of integrating roles obscured core organizational structures, giving rise to authority problems. During the Blakeney period, the precise nature and function of the "trip wire" was more sensed than understood by most Crowncorporation decision makers. Although not a secret, the device was, at least in theory, unobtrusive. Its actual quarry were so-called prima donnas, ministerial board chairmen apt to be more concerned about their roles as ministers in charge of Crown corporations than about the application of collective responsibility to the instrument. This behaviour was frowned upon by Premier Blakeney because it created "tensions" between the agency of the minister and the agency of Cabinet, thus undermining the conventions of his institutionalized Cabinet. With his trip wire in place, he could almost always have advance warning of such problems. But the fact that anyone could inadvertently trigger the device was a lingering source of concern for some corporate actors. Crown-corporation managers who came from the government bureaucracy, notably from central agencies, had a fighting chance of being able to understand the nature of the trip wire. But other Crown-corporation managers—those who had no experience with central agencies or the institutionalized Cabinet decision-making style—were less successful in deciphering it; they said they wanted to see clearer lines of authority. The Devine government sought to reduce diffusion of authority and responsibility for Crown-corporation decision making by, first, deemphasizing the integrating role occupied by politicians and, second, assigning the lead integrating role to civilian board chairmen. Because the integrating roles were still present, however, a handful of principal actors continued to function at both the individual and holdingcompany board levels. Thus the authority problem did not disappear. Crown-corporation managers, less likely to have a central-agency background than during the Blakeney government's tenure, continued to raise questions about the ultimate locus of decision-making authority. It was not always clear to them—given Cabinet ministers as vice-chairmen, and a holding company populated by bureaucrats whose board of directors was a Cabinet committee—just who gave the orders and who made the suggestions. Of course, their interface with the Devine government's trip wire—civilian board chairmen as "integrators"—was considerably less obtrusive than it may have been during the Blakeney administration. This did not stop them, however, from wondering what was being integrated on their behalf, not to mention where, by whom, and with what impact on themselves and their corporations. In fact, one of the most interesting consequences of Saskatchewan's 177

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

lateral relations Crown-corporation organizational design was that it forced Crown-corporation decision makers to devote considerable thought to the question of how, if at all, the commercial and publicpolicy objectives of Crown corporations might be reconciled. Some concluded, of course, that the reconciliation of these two kinds of objectives was a logical and empirical impossibility. More often, however, they defined it as a question of relative priorities, the integration of which would require some kind of non-corporate, unconventional process. These were the people who spoke of a "serial process of reconciliation." The cost of these unconventional organizational arrangements was a certain amount of confusion or ambivalence. What was gained, however, was a merging of decision perspectives, which resulted in more broadly informed executives, bureaucrats, or ministers, as opposed to rigidly segregated roles in which somebody else— the Cabinet or premier—had to be the integrator. All governments, not just Saskatchewan's, will be faced with this trade-off when choosing a Crown-corporation organization design; that is, as long as the Crown-corporation instrument incorporates a matrix of commercial and public-policy objectives. Before inserting a lateral relations Crown-corporation organization design into their calculus, however, they would be wise to contemplate some of the broader consequences of this design in Saskatchewan. Of all the jurisdictions investigated, it was only in Saskatchewan that there appeared an unambiguous and enduring public perception that the Crown-corporation sector was a sector unto itself. This perception can be attributed, in part, to the fact that large corporations, be they privately or (especially) publicly owned, are more conspicuous within a marginal agrarian economy than within a more mature or fully diversified economy. It could be argued, in fact, that such a perception would have taken root regardless of the Crown-corporation organization design in place, simply because the instrument was there. But to this must be added the fact that Saskatchewan politicians—of all political stripes—chose to constrain their ability to practise selective responsibility for Crown corporations by linking themselves quite visibly to the ongoing management of the instrument, not just to their formation or dissolution. Convinced, in widely varying economic circumstances, that they could exploit the information advantage of the lateral relations organization design so as to use Crown corporations as instruments of vote maximization, they were simply incapable of distancing themselves from the instrument. The temptation to assume a high level of managerial involvement in Crown corporations was irresistible, to both Devine and Blakeney politicians. This avocation, in itself, might have been a relatively innocuous consequence. What made it less innocuous 178

Origins and Consequences of Crown-Corporation Design was the proclivity of the politicians to indulge in endless rhetoric, conjuring up dichotomous visions of the ultimate destiny of the Crowncorporation instrument in Saskatchewan. This was as true of the Devine government, with its "public participation" rhetoric, as it was of the Blakeney government, with its "family" of Crown-corporations rhetoric. Besieged by the immersion of Saskatchewan politicians in both the management and politics of Crown corporations and cajoled into adopting hard-line stances in the seemingly endless rhetorical "holy wars" waged over the role of the instrument, the Saskatchewan public grew more and more wary. In essence, there were few contradictions— of what we all know is a very contradictory instrument—which were not force-fed into the public perception of Crown corporations. And this happened again, and again. As the decibel levels of the rhetoric rose, so did the contradiction levels. And as the contradiction levels rose, so did the political costs of proximity to the instrument. This, then, was the essential trauma of Saskatchewan's lateral relations Crown-corporation organization design, for its practitioners as well as the Saskatchewan public-at-large.

179

Chapter Seven

Corporate Autonomy and Institutional Control: Conclusions THE ARGUMENT There is no comprehensive, perfectly objective solution to the Crown corporation as a problem in organization design. There are simply competing analogies. A private-sector corporate analogy—such as the M-form comparison advanced by the Economic Council of Canada— asks us to imagine that "a corporation is a corporation" and to approach the problem in terms of a full range of analytical criteria. Such criteria would have to articulate, in normative economic terms, what is meant by "flexibility of decision making" by Crown corporations; the "effective monitoring and control" of Crown-corporation performance by the government; and, of course, the "optimal balancing" of the two quantities. No one, including the Council, has actually tested such a framework. It seems logical, however, that anyone setting out to do so would seek to evaluate the capacity of a particular set of organizational arrangements to result, simultaneously, in flexibility of decision making by Crown corporations and the effective monitoring and control of Crown-corporation performance by the government. Moreover, it seems logical that the focus of such an evaluation would have to be heavily oriented toward micro-economics (the economics of internal information). If the organizational arrangements selected for evaluation supported flexibility of decision making by Crown corporations but did not support the effective monitoring and control of Crown-corporation performance by the government (or vice versa), they would be judged as precluding any optimal balancing of corporate autonomy and institutional control. If, on the other hand, they supported both flexibility of decision making by Crown corporations and the effective monitoring and control of Crown-corporation performance by the government, the optimum

Conclusions balancing of corporate autonomy and institutional control would be judged a likely outcome. Moreover, from an explicit, normative economic perspective, such an outcome would also (necessarily) be the mostDDDDDD Rather than proceed solely on the basis of an exhaustive taxonomy of analytical criteria with which to judge the optimal balancing of corporate autonomy and institutional control, we investigated actual information-processing and decision-making practices in three jurisdictions—Alberta, Manitoba, and Saskatchewan—under three approximations of normative models of organization design. We employed, in other words, an alternative analogy. Our Crown-corporation organization designs, discussed in chapter 2 as the "rules of the game," predict different outcomes in terms of the balancing of corporate autonomy and institutional control. But they differ from the normative models of organization design that inspired them by virtue of being able to take into account the incentives, self-interest, and maximizing behaviours of different kinds of Crown-corporation decision makers. We demonstrated, using the game analogy, how actual Crowncorporation information-processing and decision-making practices in Alberta, Manitoba, and Saskatchewan more closely approximated one or another Crown-corporation organization design. As such, these designs constitute positive explanators of different outcomes in terms of the balancing of corporate autonomy and institutional control. These outcomes are explicable not in terms of how normative models of organization design prescribe Crown-corporation decision makers "ought" to behave and reach their decisions. What counts, as we have seen, is how the various Crown-corporation organization designs result in different distributions of information advantage which pose less of a constraint to the maximizing behaviours of some kinds of principal actors than others. Our understanding of the behaviourial—as opposed to the analytical—dimensions of the Crown corporation as a problem in organization design brings us to a core set of propositions. In positive terms, information-processing and decision-making practices, in which corporate actors are less constrained by distribution of information advantage to maximize their own managerial discretion and relative autonomy, constitute a Crown-corporation organization design that will yield more corporate autonomy than institutional control. Similarly, information-processing and decision-making practices, in which bureaucratic actors are less constrained by distribution of information advantage to maximize their own policy influence, constitute a Crowncorporation organization design that will yield more institutional control than corporate autonomy. Similarly, information-processing 181

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

and decision-making practices, in which neither corporate nor bureaucratic actors are less constrained by distribution of information advantage to maximize their own objectives, constitute a Crown-corporation organization design in which the proximate balancing of corporate autonomy and institutional control will be the likely outcome. The evidence on which these propositions are based is found within our three cases: the actual dynamics of Crown-corporation decision making in Alberta, Manitoba, and Saskatchewan.

THE EVIDENCE In Alberta, during the period investigated, the rules of the game emphasized the application of conventions of individual, rather than collective, ministerial responsibility to the Crown-corporation instrument. The game rules governing the locus and substance of Crowncorporation decision-making domiciled the process's centre of gravity within the agency of the minister—not the agency of the Cabinet— and located the shortest list of decisions of the jurisdictions investigated within the central institutional framework of the government. The game rules that conditioned the reconciliation of the decision perspectives of the various principal actors and the public-policy and commercial objectives of Alberta Crown corporations were applied, for the most part, within the boards of directors of individual Crown Corporations. Generally speaking, this locus of reconciliation was less hospitable to the decision perspectives of bureaucratic than corporate actors and less indifferent to the commercial objectives of Crown corporations than their public-policy objectives. The game rules used by the Alberta government to apply its ownership prerogatives to Crown corporations included policy caveats and a case-by-case review of major Crown-corporation investment proposals. The rules did not extend, however, to the use of any particularly competitive or rigorous Crown-corporation capital-resource-allocation process. In Alberta, Crown-corporation investment proposals were informed almost exclusively by the application of prospective evaluation techniques. No formal use was made of retrospective evaluation techniques. The formal information requirements of the Alberta government were minimal, and no specific, central information collection-andprocessing resource, dedicated exclusively to the systematic monitoring of Crown corporation performance, was seen. Instead, Alberta's approach to information and information processing entailed information-processing and decision-making practices that most closely approximated the self-contained Crown-corporation organization 182

Conclusions design. Central-bureaucratic-monitoring agents could ask for the information they required to perform their prospective evaluations of Crown-corporation performance. Corporate actors, however, decided the quantity and quality of information they would supply, a practice that epitomized the considerable information advantage they enjoyed. Such practices, in Alberta, resulted in a distribution of information advantage that permitted corporate actors not only to enter into exclusive exchange-relationships with political actors, but to exploit the information dependencies of bureaucratic and political actors and to achieve more closely their own objective of increased managerial discretion and relative autonomy. These practices approximated a selfcontained Crown-corporation organization design that yielded a greater amount of corporate autonomy than institutional control. In Manitoba, by way of contrast, the establishment of the ERIC/DCI nexus represented an experiment in the application of conventions of collective ministerial responsibility and central-agency machinery to the Crown-corporation instrument. Rules of the game governing the locus and substance of Crown-corporation decision making domiciled the centre of gravity of the process within the agency of Cabinet— rather than the minister—and located the longest (in fact, an indeterminate) list of decisions of the jurisdictions investigated within the central institutional framework of the government. The game rules conditioning the reconciliation of the decision perspectives of the various principal actors and the commercial and public-policy objectives of Manitoba Crown corporations were applied, for the most part, within the central institutional framework of the government. This locus of reconciliation, generally speaking, was less hospitable to the decision perspective of the corporate than the bureaucratic actors and less indifferent to the public-policy objectives of Crown corporations than their commercial objectives. The game rules used by the Manitoba government to apply its ownership prerogatives to Crown corporations included the development and articulation of a comprehensive administrative-policy framework for Crown corporations, as well as an approach to Crown-corporation capital-resource-allocation based on a generic, corporate planning process. A combination of prospective and retrospective evaluation techniques informed Crown-corporation investment decisions in Manitoba. The formal information requirements of the government were manifold, and the Department of Crown Investments (at the behest of ERIC) served as a central information processing-and-collection resource dedicated exclusively to the systematic monitoring of Crown-corporation performances. The province's approach to information and information 183

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

processing entailed information-processing and decision-making practices that most closely approximated a vertical-information-systems Crown-corporation organization design. Bureaucratic actors who ran the vertical information system were formally mandated to extract whatever information they required from corporate actors on a regular and continuous basis, a practice that epitomized the considerable information advantage they enjoyed. Such practices, in Manitoba, resulted in a distribution of information-advantage that permitted centralbureaucratic-monitoring agents to enter into exclusive exchange-relationships with political actors, nearly appropriate the informationadvantage of corporate actors and exploit the information dependencies of political actors, and more closely achieve their own objective of increased policy influence. These practices approximated a verticalinformation-systems Crown-corporation organization design which, at least for a time, yielded more institutional control than corporate autonomy. In Saskatchewan, unlike either Alberta or Manitoba, the rules of the game placed an equivalent emphasis on the firm application of conventions of individual and collective ministerial responsibility to the Crown-corporation instrument. Although the game rules governing the locus and substance of Crown-corporation decision-making varied somewhat from administration to administration, they did not emphatically locate the process's centre of gravity within the agency of either the minister or the Cabinet. In addition, they domiciled a list of decisions of variable yet intermediate (compared to Alberta and Manitoba) length within the central institutional framework of the government—in Saskatchewan, a Crown-corporation holding company. The rules of the game that conditioned the reconciliation of the decision perspectives of the various principal actors and the commercial and public-policy objectives of Crown corporations were applied first within the boards of directors of individual Crown corporations and then, if necessary, within the board of directors of the holding company. This constituted a serial process of reconciliation that was no less hospitable to the decision perspective of one kind of principal actor than another and no less indifferent to the public-policy, than the commercial, objectives of Crown corporations. In addition, the rules of the game used by the Saskatchewan government to apply its ownership prerogatives to Crown corporations took the form of a strict capital-rationing process. They also manifested themselves in the Saskatchewan politicians' desire to control Crown corporations by having at their disposal information flowing not only vertically, within the formal Crown-corporation decision-making process; but also horizontally, within the informal Crown-corporation decision-making process. 184

Conclusions Crown-corporation investment decisions in Saskatchewan were informed by the application of prospective evaluation techniques that discriminated between information that was both formally and informally derived. This evaluative mode eschewed the application of formal, retrospective evaluation techniques, establishing instead certain organizational devices (integrating roles) with which to monitor departures from anticipated outcomes on an informal basis. The information requirements of the government were both formal and informal in nature, and the central information collection-and-processing resource was augmented by integrating roles. This approach to information and information processing consisted of information-processing and decision-making practices that most closely approximated the lateral relations Crown-corporation organizational design. The distribution of information advantage in Saskatchewan was determined by assignment of integrating roles, a practice that constrained the information advantage of corporate or bureaucratic (or both) actors (depending, of course, on the identity of those occupying the integrating roles at any particular time). That practice consistently resulted, however, in an information advantage for political actors, who always occupied integrating roles. Such practices, in Saskatchewan, resulted in a distribution of information-advantage that constrained the ability of corporate or bureaucratic actors (or both) to enter into exclusive exchange-relationships with political actors, exploit the information dependencies of political actors, and more closely maximize their own objectives. All in all, these practices constituted a lateral relations Crown-corporation organization design that yielded a proximate balancing of corporate autonomy and institutional control. THE CHALLENGE We conclude by emphasizing that a positive analysis of the Crown corporation as a problem in organization design simply demonstrates how different Crown corporation organization designs act to constrain the maximizing behaviours of different kinds of principal actors, so as to yield different outcomes in terms of the balancing of corporate autonomy and institutional control. In other words, such an analysis has the ability to predict that different Crown-corporation organization designs will result in qualitatively different balancing outcomes. However, it does not and cannot advance any judgments, much less measurements, of the "optimality" of the various Crown-corporation organization designs, or their balancing outcomes. Nor can it make any predictions, unlike normative models of organization design, about their relative efficiency. 185

CORPORATE AUTONOMY AND INSTITUTIONAL CONTROL

It might be imagined, as suggested by theories and models of corporate decentralization and organization design, that the choice of a Crown-corporation organization design comes down to a "calculus of optimization," in which the calculation of the costs and benefits of alternative designs culminates in the choice of the most efficient. We have found, however, no evidence whatsoever to suggest that the choice of a Crown-corporation organization design, in practice, is based on any such deliberate calculus. This is an important conclusion, because it calls into serious question the normative perspective on the Crown corporation as a problem in organization design articulated by the Economic Council of Canada in Minding the Public's Business. In other words, we have eliminated at least one possible "cause" of Crown-corporation organization designs—the one, at that, probably closest to most economists' hearts. Nor have we found any explanator that might be more in line with the thinking of non-economists interested in Crown corporations as a problem in organization design. At least, we have not found any over-arching ideological explanator; just several qualifications to the hypothesis that ideology has very little to do with the management of Crown corporations. Because these Crown-corporation organization designs yield balancing outcomes consistent with the predictions of their inspiration— normative models of organization design—I think that a transactionscosts analysis dedicated to the measurement and evaluation of their relative efficiency would constitute a timely and logical addition to the study of the Crown corporation as a problem in organization design. However, as long as the Crown-corporation instrument incorporates a mixture of public-policy and commercial objectives, the question of the relative efficiency of the various Crown-corporation organization designs and their balancing outcomes will be exceedingly difficult to resolve. That there is no "bottom line" is, indeed, the bottom line of a positive analysis of the Crown corporation as a problem in organization design. This inference is not without relevance to those who prefer a normative approach to the problem. Until such time as the required evaluative methodologies are developed and perfected, there is little doubt that the positive outcomes of the various Crown-corporation organization designs can be understood only in terms of who is "winning" the Crown-corporation "game." Their normative implications are anyone's guess—or, as likely, sermon. It is to be hoped, however, that they will be a candidate for further investigation.

186

Appendix 1 Alberta Crown Corporations (31 March 1986)

Corporation

Year established

Employees

Assets (OOO's of$)

Legislation

Objective/MandDate

Agricultural Development Act

To serve as a supplementary lender to farmers and agribusiness within Alberta

1,143

Alcohol and Drug Abuse Act

To serve as a treatment and education service related to the use of alcohol and other drugs

3,397

Alberta Art Foundation Act

To encourage and promote Alberta art artists; support public art galleries

Alberta Agricultural Development Corp.

1972

185

1,101,832

Alberta Alcoholism Drug Abuse Commission

1980

371

Alberta Art Foundation

1972

Alberta Educational Communications Corp.

1973

216

10,231

Alberta Energy Corporation

1974

300

2,013,500

Alberta Educational To consolidate and upgrade Communications Corp. educational media services Act Alberta Energy Company Act

To involve itself, as a Canadian owned, Albertabased company, in the exploration, development and production of natural resources

Alberta Foundation for the Performing Arts

1978

4

Alberta General Insurance Company

3,293

Cultural Development Amendment Act

To support, and contribute to the development of, the performing arts in Alberta

626

Alberta General Insurance Company Act

To provide general insurance

Alberta Government Telephones Act

To provide telephone service

Alberta Government Telephone Commission

1958

11,400

2,639,524

Alberta Hail and Crop Insurance Commission

1969

98

204,742

Hail and Crop Insurance Act

To administer hail and all-risk crop insurance

Alberta Liquor Control Board

1924

1,325

182,006

Liquor Control Act

To control and sell alcoholic beverages

Alberta Motion Picture Development Corp.

1981

Motion Picture Development Act

To stimulate the film and video production industry in Alberta

Alberta Mortgage and Housing Corporation

1984

Alberta Mortgage & Housing Co. Act

To provide mortgage-lending development and property management services

Alberta Municipal Finance Corporation

1956

Alberta Mun. Finance Corporation Act

To assist municipalities to obtain capital funds at the lowest cost

1,125

600

4,207,210

5,236

Corporation

Year established

Alberta Oil Sands Technology and Research Authority

1974

Alberta Opportunity Company

1972

Alberta Petroleum Marketing Commission

1980

Alberta Research Council

1921

Alberta Resources Railway Corporation

1970

Employees

100

500

Assets (OOO's of$)

Legislation

Objective/MandatDe

20,209

Oil Sands Technology Research Authority Act

To provide the means to assist, promote and encourage research for developing new oil sands technology

153,217

Alberta Opportunity Fund Act

To develop resources and promotion of growth and diversification in the Alberta Economy

463,940

Petroleum Marketing Act

To act as an agent for selling of Crown's royalty share and lessee's share of petroleum from Crown leases

56,158

Alberta Research Council Act

To promote economic development in the province through research in science and technology

42,632

Alberta Research Railway Corporation Act

To lease the Alberta resources railway to Canadian National Railways

Alberta Special Waste Corporation

1984

7

14,344

Special Waste Management Act

To look after the establishment and operation of facilities to handle hazardous waste

Alberta Terminals Ltd.

1979

55

19,536

Companies Act

To operate grain terminals

Alberta Treasury Branches Deposits Fund

1938

Sources: Canadian Key Business Directory (1978) Corpus Almanac (1987) Annual Reports

4,520,876

Treasury Branches Act To operate banking services

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Appendix 2 Manitoba Crown Corporations (31 March 1986)

Corporation

Year established

Employees

Assets (OOO's of$)

A. E. McKenzie Co. Ltd.*

1906

200

8,027

Channel Area Loggers Ltd.*

1973

36

801

Community Economic Development Fund*

1971

Manitoba Energy Authority*

NA

NA

Leaf Rapids Town Properties Ltd.*

1971

Liquor Control Commission*

1923

Manitoba Agricultural Credit Corporation*

1959

Legislation

Objective /Mandate To trade (wholesale) in seeds and horticultural products

Natural Resource Development Act

To provide a viable logging operation to create employment on Lake Winnipeg's east side

Community Economic Development Act

To provide financial assistance to encourage development in remote communities

NA

Manitoba Energy Act

To negotiate all extraprovincial energy transactions

-

10,412

Companies Act

To generate Leaf Rapids townsite

408

17,249

Liquor Control Act

To control and sell alcoholic beverages

Agricultural Credit Corporation Act

To provide credit, assist farmers in obtaining credit, assist in the development of farms

4,763

NA

216,993

5,835

Crop Insurance Act

To make available comprehensive low-risk insurance to farmers

20,678

Development Corporation Act

To encourage balanced development of industry with financial assistance

127,703

Companies Act

To operate pulp-and-paper mill and sawmill

440,468

Housing and Renewal Corporation Act

To develop, control and direct housing in the province

Manitoba Hydro Act

To generate, transmit, distribute electrical power/ energy

Natural Resources Development Act

To initiate mineral exploration projects that attract participation by the private sector

Automobile Insurance

To administer a comprehensive, automobileaccident insurance plan

Oil and Gas Corporation Act

To initiate, and to participate in the discovery and development for profit of the province's petroleum resources

Manitoba Crop Insurance Corporation

1970

Manitoba Development Corporation*

1958

20

Manitoba Forest Resources Ltd.* (ManFor)

1973

650

Manitoba Housing and Renewal Corporation

1967

NA

Manitoba Hydro Electric Board*

1921

3,800

3,223,398

Manitoba Mineral Resources Ltd.*

1971

14

6,140

Manitoba Public Insurance Corporation*

1970

1,000

336,587

Manitoba Oil and Gas Corporation*

1984

9,479

Year established

Employees

Assets (O00'sof$)

Manitoba Telephone System

1908

4,800

796,942

Manitoba Telephone Act

To provide telephone services

Manitoba Water Services Board

1959

24,754

Water Services Board Act

To supply water to municipalities

Moose Lake Loggers Ltd.*

1971

Natural Resources Development Act

To provide a viable logging operation that will provide employment for residents of Moose Lake

Corporation

Venture Manitoba Tours Ltd.

74

794

Legislation

2,970

* Crown corporations for which the Department of Crown Investments claimed jurisdiction. (Source: Supplementary information for legislative review, 1987-88 Estimates) Sources: Canadian Key Business Directory (1987) Corpus Almanac (1987) Annual Reports

Objective/Mandate

To provide, operate, and maintain tourist facilities

Appendix 3 Saskatchewan Crown Corporations (31 March 1986)

Corporation

Year established

Employees

5

Assets (O00'sofDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 2,176

Crown Corporations Act

To train and retrain people employed in Saskatchewan's advanced technology sector

Advanced Technology Training Centre

1984

Agricultural Credit Corporation of Saskatchewan

1973

Agricultural Development Corporation of Saskatchewan*

1974

2,953

Crown Corporations Act

To facilitate domestic and export trade in Saskatchewan's agricultural products. To manage international development projects

Crown Management Board (Government Finance Office from 1947 to 1978, Crown Investments Corporation from 1978 to 1983)

1983

7,229,677

Crown Corporations Act

To review and approve financial and strategic plans, capital allocations and implementation of government Crown-corporation policy

Agricultural Credit To provide low-interest loans Corp. of Saskatchewan to farmers who wish to begin or expand a livestock or Act irrigation exercise

Information for fiscal year 1986-86 not available at time of investigation

135,441

Municipal Finance Corporation Act

To facilitate access to capital funds for financing municipal projects

3,800

Crown Corporations Act

To provide employment and training to individuals in receipt of provincial financial assistance

1,700

1,249,852

Crown Corporations Act

To develop Saskatchewan's potash resources

1973

200

17,326

Crown Corporations Act

To act as a computer-service corporation for the Saskatchewan government

Saskatchewan Crop Insurance Corporation

1974

100

258,380

Saskatchewan Crop Insurance Act

To make comprehensive allrisk insurance available to all farmers

Saskatchewanv Development Fund Corporation*

1978

Saskatchewan

1963

54

154,749

1949

500

33,889

Municipal Finance Corporation of Saskatchewan*

1970

New Careers Corporation of Saskatchewan

1984

19

Potash Corporation of Saskatchewan*

1975

Saskatchewan Computer Utility Corporation*

572

Economic

Saskatchewan To administer Saskatchewan Development Fund Act Development Fund Industrial Development To provide assistance to Act industry

Development Corporation* Saskatchewan Forest Products Corporation*

Crown Corporations Act

To manage operations in woods, sawmills, lumber yards and planing mills

Year established

Employees

Saskatchewan Government Insurance*

1945

1,270

Saskatchewan Government Printing Company*

1945

Saskatchewan Grain Car Corporation

1980

Saskatchewan Housing Corporation

DDDD

Saskatchewan Liquor Board

DDDD

Saskatchewan Minerals* Saskatchewan Mining and Development Corporation*

Corporation

DD

Assets (OOO's of$) 432,105

Legislation

Objective/MandatDe

To provide general insurance Saskatchewan Government Insurance and administration of compulsory auto insurance Act

2,239

Crown Corporations Act

To operate a general jobprinting and book-binding business

50,547

Saskatchewan Grain Car Corporation Act

To own and manage grain hopper cars on behalf of the Saskatchewan government

382,475

Saskatchewan Housing To develop, control, and direct Corporation Act housing in the province

300

126,510

Liquor Act

To control and sell alcoholic beverages

DDD

166

21,676

Crown Corporations Act

To produce and sell sodium sulphate

DDD

128

919,094

Crown Corporations Act

To search for and develop all minerals in the province

Saskatchewan Oil and Gas Corporation*

1973

223

273,889

Saskatchewan Power Corporation*

1929

3,100

2,256,112

Sask Property Management Corporation Saskatchewan Telecommunications*

1986

1947

4,600

902,201

Saskatchewan Transportation Co.* Saskatchewan Water Corporation*

1946

294

11,738

1984

220

12,436

Souris Valley Development Authority

1986

* Crown Management Board Corporation ** Information for fiscal year 1985-86 not available at time of investigation. Sources: Canadian Key Business Directory (1987) Corpus Almanac (1987) Annual Reports

Saskatchewan Oil and Gas Corporation Act

To develop, direct, and participate in the petroleum and natural gas industry in Saskatchewan Power Corporation Act To generate, transmit, and distribute electrical power and energy; to transmit natural gas

Saskatchewan Telecommunications Act Crown Corporations Act Crown Corporations Act

To provide telephone, telegraph, radio network, and television microwave facilities To operate passenger and freight transportation service To supply water to industries and municipalities, as well as to wildlife, irrigation, and recreation projects

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Notes CHAPTER 1 1 Langford, "Crown Corporations as Instruments of Public Policy," in Doern and Aucoin, eds., Public Policy in Canada, 240. 2 Economic Council of Canada, Minding the Public's Business, 115. 3 Tupper and Doern, eds., Public Corporations and Public Policy in Canada, 13. 4 Ashley and Smails, Canadian Crown Corporations, 3. 5 Tupper and Doern, Public Corporations, 13-14. 6 Seidman, "Public Enterprise Autonomy: Need for a New Theory?", International Review of Administrative Sciences 49, no. 1 (1983): 67. 7 Quoted in Langford, Transport in Transition, 154. 8 Gracey, in Andre Gelinas, ed., Public Administration and the Public Interest, 28. 9 Gordon, Government in Business, 44. 10 See Burns and Stalker, The Management of Innovation. 11 Alfred Chandler Jr., Strategy and Structure, 2. 12 Jackson, The Political Economy of Bureaucracy, 65. 13 Williamson, "The Multi-Division Hypothesis," in Maris and Wood, eds., The Corporate Economy, 345. 14 Galbraith, Organization Design, 28. 15 Williamson, in The Corporate Economy, 345. 16 Johnson, "A Framework for Crown Corporation Accountability," 17. 17 Hirshhorn, "Government Enterprise and Organizational Efficiency," 3. 18 Economic Council, Minding the Publics Business, 26. 19 Jackson, The Political Economy of Bureaucracy, 222. See also, Y Aharoni, "Managerial Discretion," R Vernon and Y Aharoni, eds., State-Owned Enterprise in Western Economies (New York: 1981) for an empirical description of factors and variables representing different kinds of information costs likely to be encountered by governments in the control of government enterprise. 20 Langford, in Public Policy in Canada, 250. 21 Tupper and Doern, Public Corporations, 41.

NOTES TO PAGES 13-35 22 Johnson, "A Framework for Crown Corporation," 19-20. 23 Langford, in Public Policy in Canada, 251.

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Musolf, Public Ownership and Accountability, 41. Johnson, "A Framework for Crown Corporation," 16. Prichard et al, Crown Corporations in Canada, 82. Langford, in Public Policy in Canada, 265. Tupper and Doern, Public Corporations, 26. Galbraith, Designing Complex Organizations, 4. Ibid., 19. Galbraith, Organization Design, 80. Williamson, Corporate Control and Business Behaviour, 4. Ibid., 12. Williamson, in The Corporate Economy, 359. Williamson, Corporate Control, 141. Gordon, Government in Business, 83. Rees, Public Enterprise Economics, 10. Prichard et al, Crown Corporations, 34. Rees, Public Enterprise, 27. Prichard et al, Crown Corporations, 35. Ibid., 129-30. Hirshhorn, "Government Enterprise," 37. Ibid., 38. Ibid., 57. Economic Council, Minding the Public's Business, 108. Gordon, Government in Business, 18. Laux and Molot, State Capitalism: Public Enterprise in Canada, 6. Johnson, "A Framework for Crown Corporation," 8. Tupper and Doern, Public Corporations, 26. Langford, in Public Policy in Canada, 242. Ibid., 269. Galbraith, Designing Complex Organizations, 4. Ibid., 19. Chandler, Strategy and Structure, 11. Williamson, Corporate Control, 350-51. Ibid., 364. Hirshhorn, "Government Enterprise," 9. Ibid., 14. Ibid., 12. Ibid., 16.

CHAPTER 2 1 2 3 4

204

Hartle, A Theory of the Budgetary Process, 25. Trebilcock et al, The Choice of Governing, 18. Ibid., 6. Niskanen, Bureaucracy and Representative Government, 36.

NOTES TO PAGES 35-52 5 Breton and Wintrobe, An Economic Analysis of Bureaucratic Efficiency (unpublished). 6 Trebilcock et al, The Choice of Governing, 13. 7 Halperin, "Why Bureaucrats Play Games," 74. 8 Laux and Molot, State Capitalism, 100. (Author's emphasis) 9 Trebilcock et al, The Choice of Governing, 13. 10 Prichard et al, Crown Corporations, 34. 11 Ibid., 38. 12 Trebilcock et al, The Choice of Governing, 13. 13 Kelly-Escobar, in L.P. Jones, ed., Public Enterprise in Less Developed Countries, 6. 14 Ibid., 105. 15 Ibid., 108. 16 Allison, Essence of Decision, 168. 17 Ibid., 164. 18 Hartle, A Theory, 76. 19 Lynn, "Government Executives as Gamesmen," 482-83. 20 Ibid., 492. 21 Hartle, A Theory, 81. 22 Trebilcock et al, The Choice of Governing, 14. 23 See also Breton and Wintrobe, The Logic of Bureaucratic Conduct in which they elucidate a theory of "selective behaviour" by bureaucrats. This theory, however, is less explicit than their later article about the specific objective function of bureaucrats. 24 Ibid., 19. 25 Allison, Essence of Decision, 171. 26 Hartle. A Theory, 67. 27 Trebilcock et al, The Choice of Governing, 14. 28 Allison, Essence of Decision, 171. 29 Hartle, A Theory, 68. 30 Trebilcock et al, The Choice of Governing, 6. 31 Hartle, "The Report of the Royal Commission on Financial Management and Accountability (The Lambert Report): A Review," 381. 32 Hartle, A Theory, 84. 33 Allison, Essence of Decision, 170. 34 Trebilcock et al, The Choice of Governing,DDD 35 Galbraith, Organization Design, 243. 36 For an excellent analysis of the "mixed enterprise" phenomenon, see Stephen Brooks, Who's in Charge? The Mixed Ownership Corporation in Canada. 37 In practice, most jurisdictions distinguish not between commercial and noncommercial Crown corporations but between the mix of objectives these corporations are deemed to have at any particular time. Thus, most public utilities are only partially commercial. But if a public utility has a wholly owned subsidiary that is purely commercial in orientation, we can think of it as a commercial Crown corporation. Also, mandates change. 38 In terms of numbers and assets, Crown-corporation sectors within these

205

NOTES TO PAGES 52-58

provinces compare much more closely with each other than with Crowncorporation sectors in other provinces, whether at the top or the bottom of the scale. They compare very closely, for example, in terms of per-capita Crowncorporation assets and Crown-corporation assets as a percentage of total government financial assets. See Prichard et al, Crown Corporations In Canada, 325, 326. 39 See, for example, Tupper and Doern, Public Corporations, preface.

CHAPTER 3 1 Tupper, "Pacific Western Airlines," in Tupper and Doern, Public Corporations and Public Policy in Canada, 301. 2 Richards and Pratt, Prairie Capitalism, 216. 3 Hustak, Peter Lougheed: A Biography, 168. 4 Incorporated under an Act of the Alberta Legislature in 1954, this company—which was initially confined to the business of transmitting Alberta gas for export—was set up by the Alberta government in such a way that no single bloc of shareholders could gain hegemony. Voting shares were first issued in 1957 and were initially restricted to Alberta residents. Since renamed the Nova Corporation, this company is heavily involved in the Canadian petrochemical industry. For further details on the formation of AGTL, see, Richards and Pratt, Prairie Capitalism, 67,68. 5 Richards and Pratt, Prairie Capitalism, 216. 6 Warrack, "The Alberta Energy Company: Mixed Ownership Model of Economic Enterprise," 3. 7 Alberta, Alberta Energy Company Act, chaps. 17-19, subsections 15, 18, 24 and 27 (1974). 8 Legislative Assembly, Debates, 23 October 1974, 3109 (Hereafter cited as Debates, date, page). 9 Tupper, "Pacific Western Airlines," 288. 10 Debates, 21 November 1983, 1758. 11 Debates, 30 October 1983, 1599. 12 Defined as a Crown corporation by Vining and Botterell in Prichard et al, Crown Corporations in Canada; as a mixed enterprise by the Economic Council of Canada in Minding the Public's Business. 13 Departmental Memorandum, Alberta Executive Council, 10 January 1982. 14 Laux and Molot, "Report on the Accountability and Control of GovernmentOwned Corporations in Canada," Report prepared for the Federal Government Treasury Board (February, 1984), 66-67. This consulting study describes control and accountability regimes in place for government-owned corporations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, and Nova Scotia. Based on extensive interviews with government officials in these selected jurisdictions, it identifies emerging trends for control and accountability of Crown corporations from a comparative perspective. 15 Ibid., 10. 16 Ibid., 13. 206

NOTES TO PAGES 58-87

17 See, for example, Kenneth Brydon. "Cabinets," in Bellamy, Provincial Political Systems, 319. Or Marsha A. and William M. Chandler, Public Policy and Provincial Politics, 104. 18 Tupper, "Pacific Western Airlines," 299-300. 19 Laux and Molot, "Report on the Accountability," 11. 20 Tupper, "Pacific Western Airlines," 300. 21 Peter Lougheed, Letter of Agreement with the President of the Alberta Energy Company, 9 October 1974. 22 Debates, 5 November 1974, 3555. 23 Tupper, "Pacific Western Airlines," 301. 24 Laux and Molot, "Report on the Accountability," 10. 25 Warrack, "The Alberta Energy Company," 17. 26 Laux and Molot, State Capitalism, 178. 27 Tupper and Pratt, "The Politics of Accountability: Executive Discretion and Democratic Control," Canadian Public Policy 6 (suppl), (February 1980): 260-70. 28 Ian Brown, "The $7-Billion Strategy," Saturday Night, December, 1980, 61. 29 Tupper, "Pacific Western Airlines," 304. 30 "Alberta Housing Demand on Increase," Journal of Commerce, 1 February 1977, 10. 31 Debates, 27 October 1983, 1503. 32 Debates, 12 March 1976, 146. 33 Debates, 22 April 1976, 779; 26 October 1976, 1659. 34 Debates, 8 December 1975, 1454; 8 March 1976, 24. 35 Debates, 2 November 1983, 1598. 36 Debates, 13 November 1975, 1033. 37 Debates, 12 March 1976, 147. 38 Debates, 1 May 1984, 727. 39 Debates, 3 April 1980, 2.

CHAPTER 4 1 Laux and Molot, "Report on the Accountability," 24. 2 Ibid. 3 Province of Manitoba, Executive Council, "Guidelines for the Seventies," April 1973, 135-36. 4 Frances Russell, Winnipeg Free Press, 13 December 1986, 7. 5 "The Future of CFI," Winnipeg Free Press, 5 November 1977, 51. 6 Paul J. Thomas, "Trouble With the Crowns in Manitoba" (unpublished), 2. 7 "Sold-Off Firms Thriving," Winnipeg Free Press, 5 November 1977, 51. 8 "Taxpayers Foot $3 Million Bill to Unload Flyer," Winnipeg Free Press, 16 May 1983, 1. 9 "Pawley Vows Publicly-Owned Oil Company," Winnipeg Free Press, 17 October 1981, 1. 10 Manitoba Oil and Gas Corporation, Annual Report, 1984, 3. 207

NOTES TO PAGES 87-116 11 "Manitoba Sprouts Crowns," Regina Leader Post, 17 April 1986, 26. 12 "Pawley Reprimands Crown Firms," Winnipeg Free Press, 9 January 1982, 1. 13 "NDP Super Agency to Get Grip on Crown Corporations," Winnipeg Free Press, 23 January 1982, 9. 14 Laux and Molot, "Report on the Accountability," 24. 15 Debates, 31 May 1982, 2873; 15 June 1984, 2015. 16 Laux and Molot, "Report on the Accountability," 27. 17 Thomas, "Trouble With the Crowns," 3. 18 "Expenditure Management: A Review and Recommendations For Reform," Final Report to the Government of Manitoba, November 1986. 19 Kenneth Brydon, in Bellamy's Provincial Political Systems, notes that the Schreyer government, in 1973, abolished a Planning and Priorities Committee established by the former PC government and that there was a "strong ideological component" in this decision (317). For whatever reason, it was not resurrected either by the Lyon nor Pawley governments. 20 "Expenditure Management: A Review," 16. 21 Laux and Molot, "Report on the Accountability," 25. 22 Debates, 31 May 1982, 2873. 23 Laux and Molot, "Report on the Accountability," 26. 24 Ibid. 25 Debates, 31 May 1982, 2873. 26 Government of Manitoba, Department of Crown Investments, Annual Report (draft), April 1986, 5. 27 See McAllister, The Government of Edward Schreyer, for an interesting account of how central-agency reform efforts failed during the Schreyer years. 28 Manitoba, Annual Report, 6. 29 Debates, 5 April 1979, 1992. 30 Manitoba, Annual Report, 6. 31 Government of Manitoba, General Manual of Administration, IB-10-10 (suppl), March 1984. 32 "Evans Given Belated Appointment," Winnipeg Free Press, 8 July 1983, 9. 33 Coopers and Lybrand, "Management Audit of MIX," 52. 34 Frances Russell, Winnipeg Free Press, 6 December 1986, 6. 35 "The Minister Should Resign," Winnipeg Free Press, 26 November 1986, 6. 36 Ibid. 37 "McKenzie Seed Shows a Profit," Winnipeg Free Press, 28 April 1982, 17. 38 Coopers and Lybrand, "Management Audit of MIX", 24-25. 39 MPIC Officers to Get Policy on Conflicts," Winnipeg Free Press, 25 June 1986, 3.

CHAPTER 5 1 Eager, Saskatchewan Government: Politics and Pragmatism, 137.

208

NOTES TO PAGES 117-32 2 Richards and Pratt, Prairie Capitalism, 105. 3 See Eisler, Dale, Rumours of Glory (Saskatoon: Western Producer Prairie Books, 1989). 4 Saskatchewan Finance, Departmental Memorandum, Premier R.W. Thatcher to Crown Corporation Chairmen, 4 June 1969. 5 MacLean, Public Enterprise in Saskatchewan, 11. 6 Ibid., 13. 7 "cic is One of the Biggest Companies in Canada," Regina Leader Post, 12 August 1982, 5. 8 Crown Investments Review Commission, Report to the Government of Saskatchewan (Regina, December 1982), 10, 15, 16, 40, 41. 9 Saskatchewan Executive Council, news release, 8 June 1983. 10 Andrew, "Public Participation in Crown Corporations: A Saskatchewan Perspective," 1-4. 11 Laux and Molot, "Report on the Accountability," 18. 12 We must emphasize that our investigation of Crown-corporation decisionmaking practices in Saskatchewan was conducted in 1986 and 1987 (the last year of the first term of the Devine government arid the first year of its second term). Although we had no opportunity to observe subsequent developments on a firsthand basis, it is obvious that any managerial cohesion achieved by the Devine government within the Crown-corporation sector during its first term of office deteriorated very badly toward the end of its second term. The board of directors of the holding company ceased to function as a Cabinet committee, mirroring a radical deinstitutionalization of cabinet decision making. With little commitment at the ministerial level to review, evaluate, and priorize Crown-corporation investment proposals in any systematic fashion, the whole corporate, strategic-planning/capital-rationing process collapsed and ultimately disappeared. This process was replaced by a fascination with so-called megaprojects sanctioned by individual ministerial advocates, many of which involved heavy borrowing or the application of other debt instruments and were not always—indeed, not often—informed by sound fiscal planning. For a review of the financial consequences of this breakdown of political and managerial discipline, see the report of the Financial Management Review Commission (the Gass Commission), Regina, 1992. 13 "cic is Like a Big Conglomerate," Regina Leader Post, 12 May 1982, 6. 14 Saskatchewan Crown Investments Corporation, Annual Report, (Regina, 1978), 6. 15 Blakeney, "Saskatchewan Crown Corporations—A Case Study," 413. 16 This disclaimer has appeared in every provincial auditor's report beginning in 1978. 17 MacLean, Public Enterprise, 9. 18 A.E. Blakeney Papers, Departmental Memorandum, Premier A. E. Blakeney to All Cabinet Ministers, Saskatchewan Archives, 31 August 1973. 19 Andrew, "Public Participation," 3. 20 MacLean, Public Enterprise, 13. 21 Beatty, "Accountability and Government Control of Crown Corporations," 19. 22 The vertical/horizontal distinction conforms with one which differentiates

209

NOTES TO PAGES 134-93 between formal and informal communication within a hierarchy. If information flow conforms with the official chain of command, it is vertical; that is, mainly up and down. If, either spontaneously or by design, the information flow is informal and is not conveyed within official hierarchical (vertical) communications channels, the most convenient way to describe it is horizontal or "sideways." The secret of a lateral-relations design is that it can be used to capture information otherwise unavailable; it is always at risk of obscurring the official chain of authority, however. This may be satisfactory to those at the very top of the hierarchy — who have set things up to tap into both flows of information—but it can be very perplexing to intermediate actors who are sometimes "end-runned." Matrix organizations—the ultimate expression of a lateral relations design— became somewhat of a fad in the late 1970s but proved to be of value only to organizations with somewhat schizophrenic goals (like certain "high-tech" firms, which must contribute to science as well as make profits). Although I am tempted to think that Crown corporations, with their conflicting commercial and publicpolicy goals, are essentially schizophrenic, I am not prepared to so hypothesize. 23 MacLean, Public Enterprise, 13. 24 Saskatchewan Crown Management Board, "Strategic Plans Format- Contenis" (not dated). 25 Debates, 18 March 1982, 669. 26 "Advocacy Ads Becoming Popular", Regina Leader Post, 12 December 1981, 6. 27 Debates, 13 December 1977, 897. 28 Debates, 18 March 1982, 670. 29 "Bernsten Assails NDP "Lust for Power," Regina Leader Post, 2 December 1981, 4. 30 Andrew, "Public Participation," 2. 31 "Devine on 'Mixed Master' Economy," Regina Leader Post, 5 April 1981, 5. 32 "Devine Government Must Now Deal With Faltering Economy," Regina Leader Post, 14 August 1982, 7; and Ibid., 25 November 1982, 3. 33 "The Orebiter Chomps Potash," Regina Leader Post, 26 November 1983. 34 Andrew, "Public Participation," 4. 35 For an excellent discussion of the ideological dimensions of public participation, see Pitsula and Rasmusson, Privatizing a Province.

CHAPTER 6 1 Laux and Molot, State Capitalism, 8. 2 Prichard et al, Crown Corporations, 5. 3 Ibid., 193. 4 Proponents of the class-analysis model of public policy regard Fabian socialism as more reminiscent of utilitarianism than class theory. Indeed, the Fabian emphasis on organizational forms and institutional development represents a tradition of "rational decision making" as palatable to conservative marketoriented liberals as radical planning-oriented socialists. Had social democratic governments in Western Canada been more influenced, in practice, by stronger

210

NOTES TO PAGES 153-75 versions of class theory than Fabianism, a more overarching ideological explanator of variations in the practices and experiences of these jurisdictions might have presented itself. On a more pedestrian level, however, the fact remains that both Saskatchewan and Manitoba experimented with Fabian socialism and Alberta did not. Although institutionalized cabinets have emerged in jurisdictions where Fabianism was not a factor (Ontario, for example), these jurisdictions had administrative infrastructures of a considerably larger scale, itself an explanator of the impetus toward an institutionalized Cabinet decision-making style. 5 Laux and Molot, State Capitalism, 69. 6 See, for example, Dupre, (in) Sovereign People or Sovereign Governments, 52. 7 Richards and Pratt, Prairie Capitalism, 96. 8 Cadbury, in LaPierre, Laurier, et al, Essays on the Left, 52-53. 9 McLeod, Tommy Douglas: The Road to Jerusalem, 173. 10 French, How Ottawa Decides, 386. 11 Gordon Robertson, in Paul Fox, ed., Politics Canada, 379. 12 Gillies, Why Business Fails, 88. 13 Ibid., 101. 14 Campbell and Szablowski, The Superbureaucrats, 11. 15 Dawson, The Government of Canada, 201. 16 Gillies, Why Business Fails, 84. 17 Dawson, The Government of Canada, 220. 18 Campbell and Szablowski, The Superbureaucrats, 32. 19 Richards and Pratt, Prairie Capitalism, 130. 20 Doern and Phidd, Canadian Public Policy, 138-9. 21 See, for example, "Alberta's Favoured Firm Goes to the Well," Financial Post, 8 November 1975, 17. Or 'Alberta's Proposed Sale of PWA May Not End Government Control," Toronto Globe and Mail, 29 September 1982, Bl. 22 Alberta Heritage Savings Trust Fund, Annual Report (see Schedule 3, Alberta Investments Division). 23 Alberta Government Telephones, Annual Report, 1986, 36. 24 Manitoba, An Act Respecting the Accountability of Crown Corporations (see sections 21 (1) and 21 (2), "Powers of the Corporation").

211

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GOVERNMENT

DOCUMENTS

Alberta Alberta Energy Company Act, chaps. 17-19, subsections 15, 18, 24 and 27 (1974).

216

BIBLIOGRAPHY

Alberta Government Telephones, Annual Report, 1986, 36. Alberta Heritage Savings Trust Fund, Annual Report, 1986 (see Schedule 3, Alberta Investments Division). Departmental Memorandum, Alberta Executive Council, 10 January 1982. Legislative Assembly, Debates, 23 October 1974, 3109; 5 November 1974, 355 13 November 1975, 1033; 8 December 1975, 1454; 8 March 1976, 24; 12 March 1976, 146^7; 22 April 1976, 779; 26 October 1976, 1659; 3 April 1980, 2; 27 October 1983, 1503; 30 October 1983, 1599; 2 November 1983, 1598; 21 November 1983, 1758; 7 May 1984, 727. Lougheed, Peter, Letter of Agreement with the President of the Alberta Energy Company, 9 October 1974.

Manitoba "Expenditure Management: A Review and Recommendations For Reform," Final Report to the Government of Manitoba, November 1986. Government of Manitoba, Department of Crown Investments, Annual Report (draft), April 1986. Government of Manitoba, General Manual of Administration, 75-10-10 (suppl), March 1984. Legislative Assembly, Debates, 5 April 1979, 1992; 31 May 1982, 2873; 15 June 1984, 2015 Manitoba, An Act Respecting the Accountability of Crown Corporations (see sections 21 (1) and 21 (2), "Powers of the Corporation." Manitoba Department of Crown Investments, "Crown Corporation Strategic Corporate Planning Format" (not dated). Manitoba Oil and Gas Corporation, Annual Report, 1984. Province of Manitoba, Executive Council, "Guidelines for the Seventies," April 1973.

Saskatchewan A. E. Blakeney Papers, Departmental Memorandum, Premier A. E. Blakeney to All Cabinet Ministers, Saskatchewan Archives, 31 August 1973. Crown Investments Review Commission, Report to the Government of Saskatchewan (Regina, December 1982), 10, 15, 16, 40, 41. Report of the Financial Management Review Commission (the Gass Commission), Regina, 1992. Saskatchewan Crown Investments Corporation, Annual Report (Regina, 1978), 6. Report of the Financial Management Review Commission (the Gass Commission), Regina, 1992. Saskatchewan Executive Council, news release, 8 June 1983. Saskatchewan Finance, Departmental Memorandum, Premier R.W. Thatcher to Crown Corporation Chairmen, 4 June 1969. Saskatchewan Legislative Assembly, Debates, 13 December 1977, 897; 18 March 1982, 669-70.

217

BIBLIOGRAPHY IN TER VIEWS For this study numerous interviews were conducted from August 1986 to March 1987. The purpose of these interviews was to derive observations with respect to actual Crown-corporation information-processing and decision-making practices within each of the jurisdictions investigated. Interviewees were selected on the basis of their presumed understanding of such practices, knowledge gained through direct experience with Crown corporations as politicians, bureaucrats, corporate actors, or informed observers. All interviews were taped and interviewees were assured that their responses would be held in strict confidence. Interviewees who did not request anonymity are as follows: Alexander, Keith. Anderson, Al. Andrew, Robert. Barg, Steven. Bauman, Harry. Beatty, Gary. Bhattia, Robert. Black, Don. Blakeney, A. E. Bolstad, W.G. Brownlee, Wayne. Carter, Michael. Chomiak, David. Cowley, Elwood. Dector, Michael. Derrick, M. B. Doern, G. Bruce. Dombowsky, David. Douglas, William. Eyton, Rhys.

218

Goodwin, Greg. Gotziman, Penny. Heron, David. Hill, George. Hindle, Colin. Hirchhorn, Ronald. Hodgins, Winston. Holland, Gordon. Hyndman, Louis. Jackson, Fred. Johnson, A.W. Larson, Donna. Larson, Neil. Laux, Jeanne. Lee, Calvin. Lloyd, Roy. Lutz, Willard. McFarlane, Lawrie. MacLean, Gordon. Moenting, Henno.

Mullington, Hugh. Pro to, Frank. Reed, John. Sadler, John. Salmon, Donald. Sheehan, Gary. Silver, Robert. Spivak, Sidney. Taylor, Nick. Thomas, Paul. Tupper, Allan. Von Richthofen, Dan. Warrack, Allan A. Wells, Garnet. Wilson, Grant. Wolff, Wolfgang. Wray, Lynn. Wright, John. Zatco, June. Ziegler, Rod.

Index

Accountability: concept of, 12; limitations of concept, 12-13, 26; versus control, 12-13 Accountability and control regimes, 50. See also Crown-corporation classification/scheduling devices Action channel: defined, 40; Crowncorporation financial management action channel, 41; expenditure budgetary process as, 40^41; rules of the game, 44. See also Locus of decision Administrative policy and Crown corporations, 91, 94-95, 97-98, 100, 103-05, 107, 110, 127, 161-62, 163, 166, 167, 173, 174, 183 Administrative/political dichotomy: Alberta, 62-63, 72-73; cabinet decision-making styles, 157; Crown corporations, 22-27; defined, 22; Manitoba, 93-94; Saskatchewan, 126-27 Administrative rationality, 39 Adversarial approach to policy /program evaluation, 45. See also Courtroom analogy Agency problem: Crown corporations, 19-22, 32, 65, 98, 101, 171, 174 defined, 17; M-form palliative, 1718 Agent, in agent-principal relationship. See Agency problem Alberta, why selected as case jurisdiction, 50-51

Alberta case study. See Administrative/political dichotomy; Arm'slength relationship; Bureaucratic actors; Capital rationing, Central agencies and Crown corporations; Collective ministerial responsibility for Crown Corporations; Collegiality of political and bureaucraticactors; Consequences of Crowncorporation organization designs; Corporate actors; Corporate enterprise group; Corporate strategic planning (Crown corporations); Crown-corporation classification / scheduling devices; Crown-corporation financial management action channel; Crown-corporation objectives; Decision perspectives of principal actors; Departmentalized Cabinet; Individual ministerial prerogative; Information advantage, in practice; Information advantage, in theory; Institutional decision constraints; Institutionalized Cabinet; Mixed enterprises; Monitoring and control of Crown-corporation performance in practice; Monitoring and control of Crown-corporation performance, in theory; Origins of Crown-corporation organization designs; Ownership prerogatives, application to Crown corporations; Performance measurement/evaluation in corporate organisation

INDEX

theory; Performance measurement/ evaluation in government enterprise theory; Performance measurement/ evaluation in practice; Political actors; Political parties; Privatization; Prospective evaluation of Crown-corporation performance; Retrospective evaluation of Crowncorporation performance; Selective rationality; Selective responsibility; Self-contained Crown-corporation organization design; Short-list (strategic decisions); Strategic behaviour, in practice; Strategic behaviour, in theory Alberta Energy Company, 54-56, 62, 65-66, 72, 77, 78, 79, 80, 81 Alberta Heritage Savings and Trust Fund, 58, 68, 69-70, 77, 80, 165, 172 Allison, Graham, action channel, 40; rules of the game, 44-45 Analogies, use of, to explain publicpolicy decision making: attraction, 33-34; downfall, 180. See also Courtroom analogy; Game analogy; Private-sector corporate analogy Arm's-length relationship: administrative/political dichotomy, 22-27; Alberta, 62-63, 160-61; Cabinet decision-making styles, 158; defined, 6; Manitoba, 93, 96, 106, 108, 161, 174; most advantageous interpretation of, by corporate actors, 36; Saskatchewan, 126-27, 137, 141^2, 144, 162 Autonomy-control issue: defined, 34; normative perspectives on, 332; optimization perspective, 31— 32; positive perspective on, 33-52 Balancing of autonomy and control (Outcomes): efficiency (see Calculus of optimization); expressed as behaviourial propositions, 181-82; in practice, 83, 114, 151; positive explanation of, 152, 169, 181, 185; predicted by Crown-corporation organization designs, 35, 46, 52 (see also Rules of the game) Behaviourial. See Positive; Game analogy 220

Blakeney, Allan E., 117, 126, 129 136, 162, 177 Borcherding, Thomas, public sector monitoring, 20-21 Breton, Andre, and Wintrobe, Ronald: game analogy, 43; selective efficiency, 35, 43 Bureaucratic actors: and corporate actors, 38, 43-44; decision perspective of, 37; information advantage (predicted by vertical information systems rules of the game), 47-48; information advantage of, and balancing outcomes, 181-82; and political actors, 3738; practice of selective efficiency by, 35, 43; stature of, and Cabinet decision-making styles, 155-58; utility maximized, 37 Bureaucratic actors (Alberta): Auditor General, 56; Executive Council, 56, 60; Provincial Treasury, 56-57, 60-61, 66-70, 72, 74-77, 160, 164, 170-71 Bureaucratic actors (Manitoba): Department of Crown Investments, 88, 89, 91-92, 93, 94, 97, 98-100, 100-03, 103-06, 110, 111, 112, 161, 166-67, 173-74, 175, 18384; Department of Finance, 112; Department of Industry, Trade and Technology, 92, 112; Provincial Auditor, 94, 103-04, 108 Bureaucratic actors (Saskatchewan): Crown Investments Corporation, 115, 118-20, 122, 124, 126, 129, 132, 135-37, 162, 167-68, 18485; Crown Management Board, 115, 120, 121, 123, 124, 130-32, 137^1, 146, 162-63, 167-68, 177-78, 184-85; Corporate Secretaries, 124, 129, 130, 131, 132, 135, 137, 138, 168; Department of Finance, 118, 123; Department of Public Participation, 124, 146-47; Government Finance Office, 115, 116-18, 129, 155; Provincial Auditor, 127; Provincial Treasury, 116, 117 Bureaucratization of Crown corporations, 14-15, 71, 139, 171, 174 Bureaucrats. See Bureaucratic actors

INDEX

Burns, T. and Stalker, G. M., contingency theory, 7; organization types, 7 C-24 legislation, 13-14. See also Federal government Crown corporations Cabinet, Cabinet ministers, and Crown corporations. See Cabinet decision-making styles; Conventions of ministerial responsibility; Ministerial responsibility for Crown corporations Cabinet decision-making styles, influence of, on origins of the rules of the game: locus and substance of decision, 160-63; reconciliation of decision perspectives and Crowncorporation objectives, 163-69. See also Departmentalized Cabinet; Institutionalized Cabinet Cadbury, George, 154-55 Calculus of instrument choice. See Instrument choice Calculus of optimization: criteria informing, 28-29; defined, 27; no evidence of occurrence in actual practice, 186; qualitative limits to, 32 Campbell, Colin and Szablowski, George: 157-58 Capital budgeting. See Crown-corporation financial management action channel Capital rationing: Alberta, 70, 165; Manitoba, 95, 99, 102, 167; Saskatchewan, 132, 134, 139-40, 162, 168, 184 Central agencies and Crown corporations: Alberta, 60-61, 66-69, 7071, 73-76, 81-82, 160, 164-65, 182-83; Federal government, 1415, 25; Manitoba, 91-92, 93, 95, 96, 98-100, 100-06, 111, 161, 165-67, 183-84; Saskatchewan, 117-19, 120, 121-41, 145, 147, 149-50, 162, 177, 184. See also Cabinet decision-making styles Central institutional framework of government. See Cabinet, Cabinet ministers, and Crown corporations; Central agencies and Crown corporations Centralized and decentralized organization forms: comparisons of, 7-8;

design options, 28-29; test for distinguishing between, 8. See also Information-processing model of organization design; Multidivisional form of corporate organization Centralized organization design. See Vertical information systems organization design Centralized organizations: control loss within, 10; information overload within, 15. See also Unitary form of corporate organization Chandler, Alfred A., decision categories, 30; multidivisional form, 7 Chandler, Marsha, 153 Chief executive officers of Crown corporations: compared to M-form divisional managers, 21. See also Corporate actors Churchill Forest Industries, 85, 96 Civil servants. See Bureaucratic actors Collective ministerial responsibility for Crown corporations: Alberta, 58, 66-67, 69, 73-74, 75-76, 160, 182; Manitoba, 88-91, 91-92, 9899, 105-06, 107-08, 111, 161, 175, 183; Saskatchewan, 116-17, 120, 121-23, 129, 130-31, 13436, 162, 177, 184. See also Institutionalized Cabinet Collegiality of political and bureaucratic actors: Alberta, 67, 164; Manitoba, 98, 99, 166; Saskatchewan, 131, 168. See also Institutionalized Cabinet Commercial freedom. See Corporate autonomy Commercial objectives of Crown corporations. See Crown corporation objectives Commerciality: and the arm's-length relationship, 22-27; as criterion in definition of the term "Crown corporation" for this study, 51 Commercialization of Crown corporations, 19, 24; and the decision perspective of corporate actors, 36 Competition: in capital markets and organization form, 18; in political markets and control of public enterprise, 20 221

INDEX

Consequences of Crown-corporation organization designs: analytic perspectives, 152, 159, 169; Alberta, 83, 170-72; Manitoba, 114, 17275; Saskatchewan, 151, 175-79 Contingency theory: and this book, 5; defined 7; Galbraith interpretation, 27 Control of Crown corporations. See Monitoring and control of Crown corporations, in practice; Monitoring and control of Crown corporations, in theory Control loss within centralized organizations, 10 Conventional departmental bureaucracies. See Departments of government Conventions of ministerial responsibility : applicability to Crown corporations not precise, 14. See also Collective ministerial responsibility for Crown corporations; Individual ministerial prerogative and Crown corporations Corporate actors: and bureaucratic actors, 38, 43; decision perspective of, 35-37, 38^40; information advantage (predicted by self-contained rules), 46-A1; information advantage of, and balancing outcomes, 181; and political actors, 39-40, 43; practice of selective rationality by, 38, 39^40; stature of, and Cabinet decision-making styles, 158; utility maximized (objective function), 35-36, 39-40 Corporate actors (Alberta): board chairmen, 58, 65-6, 164; corporate boards, 58-60, 61-62, 64-66, 71, 73, 76, 78, 82, 160-61, 164, 182; corporate management, 59-60, 6566, 68-69, 71-72, 75-77, 81-82, 83, 164-65, 170, 182-83 Corporate actors (Manitoba): board chairmen, 91-92, 96, 97, 98; corporate boards, 91, 92-93, 94, 9697, 99, 102, 161, 175; corporate management, 87, 92, 96-97, 98, 99-100, 102-06, 108-09, 109-13, 114, 166, 173, 174-75, 183-84 Corporate actors (Saskatchewan):

222

board chairmen (civilian), 120, 123 125, 128, 130, 131, 137, 138-39, 141, 145, 150, 167, 168, 176, 177 board chairmen (ministerial), 117, 119, 123, 125, 128-29, 131, 135 136-37,148-49,167,177;corporate boards, 117, 119, 123, 125-26, 127, 128-30, 134, 136, 137, 145, 151, 162, 177, 184; corporate management, 118, 125, 129, 130, 13233, 136, 138, 140, 147-51, 167, 168, 176, 177, 185 Corporate autonomy: balancing of, with institutional control, 22-27; "correct" amount of, 27; doctrine of, 5-6; as flexibility of decision making by Crown corporations, 512; inhibited by vertical information systems rules of the game, 47; mandated by self-containment rules of the game, 46; most advantageous interpretation of, by corporate actors, 36; neither mandated nor inhibited by lateral relations rules of the game, 49; "optimal" balancing with institutional control, 31-32 Corporate decentralization, theories and models of: normative appeal to Crown-corporation theorists, 4; review of, 7-11. See also Information-processing model of organization design; Multidivisional form of corporate organization Corporate enterprise group: Alberta, 54-56, 59, 62-63, 64-66, 72, 7779, 80-81, 164, 165, 170, 171; defined, 50-51; Manitoba, 85-87; Saskatchewan, 116-18, 119, 141 142, 144, 145, 147 Corporate form of organization: evolution of, 11; managerial flexibility of, 4; romanticization of, 5, 125 ; semantic genuflection to, 22 Corporate strategic planning (Crown corporations): Alberta, 57, 75-77; Manitoba, 90, 98, 99-100, 101-03, 166, 167, 174; Saskatchewan, 124, 134-35, 139^0 Courtroom analogy, 45 Crown corporation, defined, for the purpose of this study, 50—51

INDEX

Crown-corporation budgets, budgetary process. See Crown-corporation financial management action channel Crown-corporation classification/ scheduling devices: Alberta, 56; Federal government, 13-15; Manitoba, 88; Saskatchewan, 116, 118 Crown-corporation financial management action channel: Alberta, 5861, 68-71, 160-61, 164-65, 17071, 182-83; defined, 40-41; Manitoba, 89-93, 98-100, 161-62, 165-67, 172-73, 183-84; Saskatchewan, 118, 121-25, 132-33, 167-68, 175-76, 184-85. See also Locus of decision Crown-corporation managers: opportunity for discretionary behaviour, 20-22. See also Corporate actors Crown-corporation objectives: as criterion in the definition of the term "Crown corporation" for this study, 51 ; and the decision perspective of corporate actors, 36-37, 3840; harmonization of, 25-26; influence of Cabinet decision-making styles on reconciliation of, 163-69; mixed nature of, 11, 19, 24; reconciliation of, in practice (Alberta) 63, 65-66, 69, 72, 81-82, 164-65, 182; (Manitoba) 97-98, 109-10, 1 1 1 , 166, 183; (Saskatchewan) 116, 133-34, 145-46, 150-51, 167-69, 184 (see also Integrating roles); ultimate reconciliation of, 186 Crown-corporation organization designs: consequences of (see Consequences ... ); constraining influence on the strategic behaviours of principal actors, 35, 46, 181-82, 185; defined, in terms of the rules of the game, 46^49; efficiency of, 169; origins of (see Origins of Crowncorporation organization designs); positive approximations of normative models of organization design, 35, 45-46. See also Lateral relations Crown-corporation organization design; Self-contained Crowncorporation organization design;

Vertical-information-systems Crowncorporation organization design Crown Investments Review Commission (Saskatchewan), 119-20, 124, 125, 127, 130, 145, 148 Dawson, R. MacGregor, 157 Decentralization. See Corporate decentralization, theories and models of Decentralized organization designs. See Self-contained Crown-corporation organization design; Self-contained organization design; Lateral relations Crown-corporation organization design; Lateral relations organization design Decision categories: in the M-form, 7-8, 30-31; positively defined, 4142. See also Operational decisions; Strategic decisions; Substance of decision Decision perspectives of principal actors: bureaucratic actors, 37-38; corporate actors, 35-37, 38^40; effects of variable levels of organizational autonomy on, 45-49; influence of Cabinet decision-making styles on reconciliation of, 163-69; inherent conflicts among, 38, 43; harmonization of, 37-38, 39-40; and objective functions, 34-35; political actors, 37; reconciliation of, in practice, (Alberta) 65, 69, 70-71, 81-82, 164-65, 182; (Manitoba) 97-98, 99-100, 109-13, 165-66, 183; (Saskatchewan) 13334, 145^6, 150-51, 167-69, 184 (see also Integrating roles) Delegation of decision-making responsibility. See Corporate autonomy Departmentalized Cabinet: conceptions of (traditional), 153, 157-58; conventions of ministerial responsibility, 157; conventions of political and bureaucratic collegiality, 158; influence on Crown-corporation decision making (Alberta), 160-61; (Manitoba), 165-66, 173-74; Saskatchewan, 162-63; stature of Crown corporations, 158; stature of government departments, 157-58; stature of, in constitutional theory, 158; winners and losers, 157-58

223

INDFX

Departments of government: Attributes contrasted with those of Crown corporations, 14, 21, 22, 25, 36; stature of, and Cabinet decisionmaking styles, 157-58. See also Departmentalized Cabinet, Institutionalized Cabinet, Instrument choice, theory of Devine, Grant, 119, 143^44 Discretionary behaviour. See Strategic behaviour, in practice; Strategic behaviour, in theory Discretion, managerial. See Managerial discretion and relative autonomy; Corporate autonomy Distancing. See Selective responsibility Doern, G. B. and Phidd, Richard W., 158-59 Douglas, T. C., 116, 117, 146, 147, 155, 167 Due process, 45. See also Rules of the game Economic Council of Canada: autonomy-control issue, 3; calculus of optimization, 32; corporate autonomy, 11-12; institutional control, 21—22; normative prescriptions 11-12, 21-22, 31-32, 33; private sector corporate analogy, 33, 180 Efficiency: of balancing outcomes, 185-86; of Crown corporations, 6, 18-19, 26; and democratic control, 157; and effective monitoring, 15— 17; and optimization, 27—32; and organization form, 8, 10, 11; purely normative orientation of, 42; selective efficiency, 35, 43 Evaluation. See Performance measurement/evaluation in corporate organization theory; Performance measurement/evaluation in government enterprise theory; Performance/measurement/evaluation in practice Ex-ante control. See Monitoring and control of Crown-corporation performance, in practice; Monitoring and control of Crown-corporation performance, in theory Exchange relationships. See Strategic

224

behaviour, in practice; Strategic behaviour, in theory Ex-post control. See Accountability Fabian socialism: influence of, on cabinet decision-making styles, 153, 154-55, 160; proponents of, 153, 154-55, 162, 169 Federal government Crown corporations: arm's-length prescription, 6; breakdown of a model, 26; C-24 legislation, 13, 14; Cabinet/Cabinet ministers, 13-14; and central agencies, 14-15, 25; financial accountability of, 13; House of Commons, 13, 24 Filmon, Gary, 88 Flyer Industries, 85, 86 French, Richard, 155-56 Game analogy: defined, 33; economist's self-interest postulate, 34; general theory of, 33-35; information processing and gamesmanship, 42-44; locus of the game, 40^1; positive attributes of, 33-34; predictions of (for Crown-corporation organization designs), 46-49; propositions of, for predicting Crowncorporation decision-making behaviour, 181-82; rules of the game, 44-46; substance of the game, 4142; testing of, 49-52; tested, 181. See also Allison; Breton and Wintrobe; Halperin; Hartle; Lynn; Trebilcock Getty, Don, 172 Gillies, James, 156 Gordon, Marsha: agency problem, 19, 23, 32; arm's-length relationship, 23; autonomy and efficiency, 6; commercialization, 31; government as entrepreneur, 18 Government/Crown decision-making relationship: and the autonomycontrol issue, 3; design options theoretically available to structure, 46-49; normative perspectives on, 4, 5, 12, 22, 31; organizational arrangements used by provinces to structure, 51-52; positive perspective on, 5, 33, 34. See also Crowncorporation organization designs; Provincial case studies

INDEX

Government as entrepreneur, perspective on institutional control, 18-22 Government as sovereign, perspective on institutional control, 12-15 Government enterprise. See Crown corporations; Mixed enterprises Gracey, Don, 6 Halperin, Morton J. Jr, 36 Hartle, D. G.: courtroom analogy, 45; decision perspective of bureaucratic actors, 35, 37-38; decision perspective of political actors, 37; economists' self-interest postulate, 34; game analogy as positive analytic perspective, 33-34; gamesmanship and the expenditure budgetary process, 40^41; government gamesmanship framework, 34; information processing and gamesmanship, 43 ; rules of the game, 44-45 Hirshhorn, R: M-form and Crown corporations, 11-12; monitoring and control, 21—22; optimization perspective, 31-32 Horizontal decentralization. See Lateral relations Crown-corporation organization design; Lateral relations organization design House of Commons. See Federal government Crown corporations Ideology: and the origins of Crowncorporation organization designs, 152, 153-54, 154-55, 159, 160, 163, 168, 186; and the theory of instrument choice, 152-53 Incentives: for monitoring and control of Crown-corporation performance, 19—21 ; for monitoring and control of private-sector corporate performance, 15; predictive value of, for Crown-corporation organization designs, 35, 46; of principal actors (see Bureaucratic actors; Corporate actors; Political actors); of privatesector corporate actors (See Managerial theories of the firm); systems, 33, 44^15 Individual ministerial prerogative and Crown corporations: Alberta, 5859, 64-65, 66, 73, 74, 77, 160, 164, 182; Manitoba, 91-92, 93,

99, 105-06, 109, 110-12, 161, 166, 173, 183; Saskatchewan, 116, 120, 121, 123, 129, 135-36, 14849, 150, 177, 184. See also Departmentalized Cabinet Influence. See Policy influence Informal organization. See Lateral relations Crown-corporation organization design; Lateral relations organization design Information advantage, in practice: Alberta, 76-77, 82, 83, 182-83; Manitoba, 101, 102, 110-11, 114, 173, 184; Saskatchewan, 140, 141, 148^19, 151, 176, 178, 185 Information advantage, in theory: and balancing outcomes, 181-82; defined 43^44; distribution of, predicted by lateral relations rules of the game, 49; predicted by selfcontained rules of the game, 46; predicted by vertical information systems rules of the game, 48 Information processing and decisionmaking practices, as empirical expression of Crown-corporation organization designs, 49-50. See also Provincial case studies Information processing and gamesmanship. See Game analogy Information processing and organization design. See Information-processing model of organization design Information-processing model of organization design: choice of organization design, 27-30; conceptual starting point for derivation of Crown-corporation organization designs, 45^46, 181, 186; decentralization strategies, 8-10; incentives extrinsic to, 45-46; monitoring and control strategies, 15-16; overview of, 8, 28-29; purely normative orientation of, 4243 Institutional control: balancing of, with corporate autonomy, 22-32; "correct" amount, 27; as effective monitoring, 12-22; inhibited by self-containment rules of the game, 46; mandated by vertical information systems rules of the game, 47;

225

INDEX

neither mandated nor inhibited by lateral relations rules of the game, 49; "optimal" balancing with corporate autonomy, 31-32. See also Monitoring and control of Crowncorporation performance, in practice ; Monitoring and control of Crown-corporation performance, in theory Institutional decision constraints: Alberta, 64-71; Manitoba, 95-100; Saskatchewan, 128-34. See also Rules of the game Institutionalized Cabinet: conceptions of (contemporary), 155-57; conceptions of (Fabian socialist), 153, 154-55; conventions of ministerial responsibility, 154-55, 156; conventions of political and bureaucratic collegiality, 156-57; influence of, on Crown-corporation decision making, (Alberta), 160, 164; (Manitoba), 161, 165-67; (Saskatchewan), 162-63, 167-69; stature of central agencies, 156-57; stature of Crown corporations, 158; stature of, in constitutional theory, 156-57; winners and losers, 156 Instrument choice, theory of, 11, 152-54 Integrating roles: in the informationprocessing model of organization design, 9; in the lateral relations Crown-corporation organization design, 48-^-9; in Saskatchewan, 123, 128, 134, 135-37, 138-39, 140-41, 148, 150-51, 162, 167, 168, 176-77, 185 Jackson, P. M., concept of accountability, 12-13 Johnson, A. W., accountability, 13; commercial and public policy objectives, 24; instrument choice, 17; ministerial responsibility for Crown corporations, 14 Jurisdictions selected for this study, why selected, 51 Kelly-Escobar, Janet, decision perspectives of corporate actors, 3839 Langford, John W., autonomy-control issue, 3 ; balancing of autonomy 226

and control, 26-27; Cabinet, Cabinet ministers, 13-14; central agencies, 15; parliamentary oversight, 14 Lateral relations Crown-corporation organization design: defined (rules of the game), 48^49; information advantage, 49; in practice (Saskatchewan), 151, 160, 169, 17579, 184-85; locus of decision, 48; strategic behaviour, 49; substance of decision, 49; winners and losers, 49 Lateral relations organization design: decentralization aspects, 9-10; the "informal organization," 9; monitoring and control aspects, 16; optimization criteria, 29; transactions costs logic, 9-10 Laux, Jeanne, and Molot, Maureen: balancing of autonomy and control, 24; commercialization of Crown corporations, 24, 36; Crown corporations in Alberta, 56-57; 58, 63, 69; Crown corporation^ in Manitoba, 85, 89-90, 92; Crown corporations in Saskatchewan, 121; decision perspective of corporate actors, 36; ideological explanators of instrument choice, 152-53; institutionalization of public administration, 153, 160 League for Social Reconstruction, 154. See also Fabian socialism Locus of decision: and cabinet decision-making styles, 159, 160-63; in the M-form, 8, 30-31; positively defined, 40^41. See also Cabinet decision-making styles; Crown-corporation financial management action channel Lougheed, Peter, 53-54, 55, 62 Lloyd, W. S., 116, 117, 147, 167 Lyon, Stirling, 86, 103 Lynn, Lawrence J. (Jr), substance of decision, 41^1-2 M-form. See Multidivisional form of corporate organization MacLean, Gordon, 118, 128, 132, 136 McKenzie Seeds, 85, 86-87, 103, 108

INDEX

McLeod, T. H., 155, 158 Managerial dimension of Crown-corporation decision making, 22, 24, 25-27 Managerial discretion and relative autonomy: utility maximized by corporate actors, 36-38, 39^40. See also Corporate actors Managerial theories of the firm, 15, 17 Mandate (of Crown corporation): as determinant of accountability, 24; as functional criterion in the definition of the term "Crown corporation" for this study, 51 Manitoba, why selected as case jurisdiction, 51-52 Manitoba case study. See: Administrative/political dichotomy; arm'slength relationship; Bureaucratic actors; Capital rationing, central agencies and Crown corporations; Collective ministerial responsibility for Crown corporations; Collegiality of political and bureaucratic actors; Consequences of Crown-corporation organization designs; Corporate actors; Corporate enterprise group; Corporate strategic planning (Crown corporations); Crown-corporation classification/scheduling devices; Crown-corporation financial management action channel; Crowncorporation objectives; Decision perspectives of principal actors; Departmentalized Cabinet; Individual ministerial prerogative and Crown corporations; Information advantage in practice; Information advantage, in theory; Institutional decision constraints; Institutionalized cabinet; Mixed enterprises; Monitoring and control of Crowncorporation performance, in practice ; Monitoring and control of Crown-corporation performance, in theory; Origins of Crown-corporation organization designs; Ownership prerogatives, application to Crown corporations; Performance measurement/evaluation in corporate organization theory; Performance

measurement/evaluation in government enterprise theory; Performance measurement/evaluation, in practice; Political actors; Political parties; Privatization; Prospective evaluation of Crown-corporation performance; Retrospective evaluation of Crown-corporation performance; Selective rationality; Selective responsibility; Short-list (strategic decisions); Strategic behaviour, in practice; Strategic behaviour, in theory; Vertical-information-systems Crown corporationorganization design Manitoba Development Corporation, 85, 107 Manitoba Forest Resources Corporation, 85, 86, 87, 103, 107 Manitoba Public Insurance Corporation, 85, 87, 103, 108,113 Manitoba Telephone System, 87, 88, 108-09, 112, 174, 175 Manning, Ernest C., 54 Matrix organizations, 9 Maximization, maximizing behaviours. See Strategic behaviour, in practice; Strategic behaviour, in theory Mechanistic organization form, 7 Ministerial responsibility for Crown corporations: arm's-length interpretation, 6; elusive nature of, 14; in the "policy" domain 22, 25; positive interpretation of, 37. See also Arm's length relationship; Cabinet decision-making styles; Conventions of ministerial responsibility; Political actors; Selective responsibility Mixed enterprises: excluded from definition of the term "Crown corporation," 50; Alberta, 55-56; Manitoba, 86-87; Saskatchewan, 123-24, 125, 146-47 Monitoring and control of Crowncorporation performance, in practice: Alberta, 65-66, 67-69, 7177, 82, 165, 170-71, 182-83; Manitoba, 98-100, 100-06, 17375, 183-84; Saskatchewan, 12830, 132-34, 134-41, 150-51, 168,

227

INDEX

176-77, 184-85. See also Performance measurement/evaluation, in practice Monitoring and control of Crown-corporation performance, in theory: and the arm's-length relationship, 22—23 ; government as entrepreneur perspective, 18-22; government as sovereign perspective, 19-24; inhibited by self-containment rules of the game, 46; as institutional control, 12-22; mandated by vertical information systems rules of the game, 47; neither mandated nor inhibited by lateral relations rules of the game, 48-^49; parallels with M-form, 21, 31-32; political and bureaucratic factors inhibiting, 2122. See also Performance measurement/evaluation in corporate organization theory; Performance measurement/evaluation in government enterprise theory; Performance measurement/evaluation, in practice Monitoring and control of privatesector corporate performance: and efficiency, 15-16, 17-18, 27-30; explanations of, 15-18; optimization criteria, 28-29; organization design strategies, 15-17; within multidivisional form of corporate organization, 17-18. See also Agency problem; Managerial theories of the firm Morrison, Herbert, arm's-length relationship, 6 Multidivisional form of corporate organization: containment of control loss, 10-11; control of discretionary managerial behaviour, 15, 17-18; decision categories of, 7-8, 30-31; growth and development of, 7; implicit balancing of autonomy and control within, 30-31; M-form and U-form compared, 7-8; normative application to government enterprise, 12, 21, 31-32, 126, 127, 162, 181; strategic planning within, 17-18; structure as strategy, 7; when the U-form gives way to the M-form, 7. See also

228

Chandler, Alfred; Williamson, O. E. Musolf, L. D., ambiguity of applicability of conventions of ministerial responsibility to Crown corporations, 14 Natural monopolies, excluded from definition of the term "Crown corporation," 51 Non-commercial objectives of Crown corporations. See Crown-corporation objectives Normative: analysis of consequences of Crown-corporation organization designs, 169, 185-86; analysis of the origins of Crown-corporation organization designs (see Ideology); analytic approach to the study of Crown corporations, 4-5, 180-81, 186; application of theories and models of corporate decentralization and organization design to government enterprise, 11-12, 21, 31-32 (see also Economic Council of Canada); exhortations on the balancing of autonomy and control, 22-27; exhortations on the topic of corporate autonomy, 5-6; exhortations on the topic of institutional control, 13-15; Fabian vision of public policy decision making, 154-55 ; implications of Crown-corporation organization designs, 186; intrusions on positive analysis, 3334, 169; the problem with normative exhortations, 4, 33, 42, 186; yet predictive avenues of enquiry, 159 Normatively neutral. See Positive Objective function, defined, 17. See also Managerial theories of the firm; Incentives Objectives of Crown corporations. See Crown-corporation objectives Operational decisions: defined, within the M-form, 8, 30-31; positive definition of, 42. See also Substance of decision Optimization. See Calculus of optimization; Efficiency Organic organization form, 7 Organization design: broadly defined,

INDEX

as positive explanator of the "rules of the game," 46; choice of, and effective monitoring, 15; choice of, and efficiency, 16-17, 27-30; information-processing model of, 8-10, 15-17, 27-30; positive approximations of normative models of organization design, 4546. See also Corporate decentralization, theories and models of; Crown-corporation organization designs Organization theory. See Corporate decentralization, theories and models of; Organization design Origins of Crown-corporation organization designs: analytic perspectives, 152-54, 158-59, 163-64; Alberta, 53-58, 160-61, 164-65; Manitoba, 84-89, 161-62, 165-67; Saskatchewan, 116-21, 154-55, 162-63, 167-69. See also Cabinet decision-making styles; Rules of the game Ownership: claims and monitoring incentives, 19-20; and control, separation of, 17-18; as formal criterion in the definition of the term "Crown corporation" for this study, 50-51 Ownership prerogatives, application to Crown corporations: Alberta, 6566, 68-69, 70-71, 73-74, 75-76, 81, 165, 182; Manitoba, 97-98, 100, 102-03, 105-06, 166-67, 183; Saskatchewan, 134, 146, 168, 184 (see also Capital rationing) Pacific Western Airlines, 54, 55-56, 62-63, 65-66, 72, 78-79 Parliament. See House of Commons Pawley, Howard, 87-88, 103, 109 Performance measurement/evaluation in corporate organization theory: and choice of organization design, 15-16; qualitative perspective on, 10—11, 17; reducing performance standards to release "slack resources," 27-28; technical explanations of, 15; within the M-form, 18, 21. See also Monitoring and control of private-sector corporate performance

Performance measurement/evaluation in government enterprise theory: complications posed by lack of a "bottom-line," 19; contradictions posed by imposing profitability criteria, 19; inadequate specification of intended results by "principal," 19, 23; other difficulties of measurement and evaluation, 20, 26; positively defined, 41. See also Monitoring and control of Crowncorporation performance, in practice; Monitoring and control of Crown-corporation performance, in theory Performance measurement/eval uation in practice: Alberta, 71-77, 165, 171, 321-22; Manitoba, 91, 92, 97, 100-06, 109-10, 183-84; Saskatchewan, 124, 134-41, 177, 185 Policy dimension of Crown-corporation decision making, 13, 14, 15, 16-17, 21, 22-27 Policy influence: utility maximized by bureaucratic actors, 35, 37, 42^3, 44. See also Bureaucratic actors Policy models, 158-59 Political actors: and bureaucratic actors, 37-38; and corporate actors, 39-40, 43; decision perspective of, 37; information advantage (predicted by lateral relations rules), 49; practice of selective responsibility by, 37; utility maximized (objective function), 37 Political actors (Alberta): Cabinet, Cabinet ministers; 58-59, 61, 62, 64-65, 66-68, 69, 72-73, 73-74, 77-82, 160, 164, 170, 172, 18283; Cabinet committees, 58, 60, 66, 68, 73-74, 76, 160, 164; Leg islative Assembly, 54, 55, 63, 73, 78-81 Political actors (Manitoba): Cabinet, Cabinet ministers, 89-90, 92, 93, 95-96, 98-99, 101, 105, 106-13, 161, 166, 173, 175, 183; Cabinet committees, 89-91, 91-92, 98-99, 101, 102, 103, 105, 108, 110, 112, 161, 165-67, 175, 183; Legislative Assembly, 88, 92, 107 229

INDEX

Political actors (Saskatchewan): Cabinet, Cabinet ministers, 117, 118, 119-20, 121-23, 125, 126, 12830, 135-37, 141-45, 148^19, 162, 167, 177-79, 184; Cabinet committees, 117, 119, 121-23, 128, 129, 130-32, 134-35, 140-41, 162, 167-68, 175, 177, 184; Legislative Assembly, 119, 120, 143, 146, 147 Political/administrative dichotomy. See Administrative/political dichotomy Political and bureaucratic factors inhibiting effective monitoring, 2122. See also Monitoring and control of Crown-corporation performance, in practice; Monitoring and control of Crown-corporation performance, in theory Political economy of the Crown-corporation decision-making process, 41. See also Crown-corporation financial management action channel Political incentives (and disincentives) for efficient Crown-corporation management, 19, 20, 37 Political interference in Crown corporations. See Arm's-length relationship Political parties: Alberta, 53, 54, 79; Manitoba, 84, 85, 86, 87, 88-89; Saskatchewan, 115, 116, 117, 119, 142, 143, 147, 153, 154 Political returns. See Vote maximization Political support. See Vote maximization, utility Politicians. See Political actors Positive: analysis (outer limits of), 169; approach to the study of Crown-corporation decision-making behaviour, 4, 33-35, 181-82; approximations of normative models of organization design (see Crown-corporation organization designs); attributes of the game analogy, 33-34; constraints on ideological explanators of origins of Crown-corporation organization designs, 154, 165, 167, 168-69; dimensions of information processing and information exchange, 230

42-43; economists' self-interest postulate, 34. See also Game analogy Positive interpretation of: administrative rationality of corporate actors, 38-40; bureaucratic efficiency, 35, 42—43; ministerial responsibility for Crown corporations, 37; organization design, broadly defined, as explanator of the "rules of the game," 45—46 Potash Corporation of Saskatchewan, 118, 145, 147 Prescriptive/prescriptions. See Normative Principal actors (Different kinds of). See Bureaucratic actors; Corporate actors; Political actors Principal in agent-principal relationship. See Agency problem Private-sector corporate analogy, 180 (see also Normative [application of theories and models of corporate decentralization and organization design to government enterprise]) Privatization: Alberta, 63, 172; Manitoba, 86; Saskatchewan, 120, 121, 124-25, 146-47, 179 Profitability of Crown corporations. See Performance measurement/evaluation in government enterprise theory Property rights approach to comparison of publicly and privately owned firms, 19-20 Prospective evaluation of Crown-corporation performance: Alberta, 7172, 73-77, 182; Manitoba, 100-01, 102, 183-84; Saskatchewan, 13435, 139, 185 Provincial case studies: selection criteria, 88; Alberta, 53-83; Manitoba, 84-114; Saskatchewan, 11551 Public participation. See Privatization (Saskatchewan) Public perceptions of Crown-corporation sector: Alberta, 171-72; Manitoba, 174-75; Saskatchewan, 17879 Public-policy decision making (the disciplinary focus of this study), 4— 5, 50

INDEX

Public-policy objectives of Crown corporations. See Crown-corporation objectives Qualitative: limitations on the calculus of optimization, 32; perspective on the monitoring and control of corporate performance 10, 17 Rees, Ray: contradictions posed by imposing profitability criteria on measurement and evaluation of Crown-corporation performance, 19; political incentives to efficient Crown-corporation management, 20 Retrospective evaluation of Crowncorporation performance: Alberta, 182; Manitoba, 102, 183-84; Saskatchewan, 134-35, 139, 185 Richards, John and Pratt, Larry, 54, 116, 154, 158 Romanow, Roy, 147 Rules of the game: centrality to the game analogy, 33, 44; concrete sources of, 45; as due process, 4445; as incentive systems, 44, 45; lateral relations rules, 48-49; organization design, as a carrier of, 35, 45^6, 182, 183, 184; origins of, 153-54, 159-69; self-containment rules, 46-47; vertical information systems rules, 47—48. See also Cabinet decision-making styles; Institutional decision constraints Saskatchewan, why selected as case jurisdiction, 51-52 Saskatchewan case study. See Administrative/political dichotomy; Arm'slength relationship; Bureaucratic actors; Capital rationing; Central agencies and Crown corporations; Collective ministerial responsibility for Crown corporations; Collegiality of political and bureaucratic actors; Consequences of Crown-corporation organization designs; Corporate actors; Corporate enterprise group; Corporate strategic planning (Crown corporations); Crown-corporation classification/scheduling devices; Crown-corporation financial management action channel; Crowncorporation objectives; Decision

perspectives of principal actors; Departmentalized Cabinet; Individual ministerial prerogative; Information advantage, in practice; Information advantage, in theory; Institutional decision constraints; Institutionalized Cabinet; Integrating roles; Lateral relations Crown-corporation organization design, in practice; Mixed enterprises; Monitoring and control of Crown-corporation performance, in practice; Monitoring and control of Crown-corporation performance, in theory; Origins of Crown-corporation organization designs; Ownership prerogatives, application to Crown corporations; Performance measurement/evaluation in corporate organization theory; Performance measurement/evaluation in government enterprise theory; Performance measurement/evaluation in practice; Political actors; Political parties; Privatization; Prospective evaluation of Crown-corporation performance; Retrospective evaluation of Crown-corporation performance ; Selective rationality; Selective responsibility; Short-list (strategic decisions); Strategic behaviour, in practice; Strategic behaviour, in theory Saskatchewan Energy Corporation, 147 Saskatchewan Government Insurance Corporation, 121 Saskatchewan Heritage Fund, 142-43 Saskatchewan Mafia, 155 Saskatchewan Mining and Development Corporation, 118, 147 Saskatchewan Oil and Gas Corporation, 118, 120, 121, 124, 146, 147 Scale: and cabinet decision-making styles, 160; and the selection of case jurisdictions for this study, 51; economies of, 28, 116 Schreyer, Edward, 85, 86, 87, 107 Selective efficiency, 35, 43 Selective rationality: practice of, defined and predicted, 39-40, 4749; practice of, in Alberta, 81-82,

231

INDEX

170; practice of, in Manitoba, 10913, 173-74; practice of, in Saskatchewan, 148-51, 175-77 Selective responsibility: practice of, defined and predicted, 37, 47-49; practice of, in Alberta, 77-81, 170-71 ; practice of, in Manitoba, 106-10, 172-73; practice of, in Saskatchewan, 141-47, 175-77 Self-contained Crown-corporation organization design: defined (rules of the game),46-47; information advantage, 46; in practice (Alberta), 82-83, 160-61, 164-65, 170-71, 182-83; locus of decision, 46; strategic behaviour, 47; substance of decision, 47; winners and losers, 47 Self-contained organization design: compared to decentralization of Mform, 10-11; optimization criteria, 29; transactions costs logic, 8-9 Self-interest, economists' postulate of, 34. See also Incentives Separation of ownership and control. See Agency problem Short-list (strategic decisions): Alberta, 63-64, 71-72, 83, 161; concept defined, 42; length of, and Cabinet decision-making styles, 159; Manitoba, 93-95, 161-62; Saskatchewan, 127-28, 139, 16263. See also Cabinet decisionmaking styles; Substance of decision Slack resources organization design, 27, 28 Strategic behaviour, in practice: Alberta, 77-82, 170-71, 183; Manitoba, 106-13, 172-74, 184; Saskatchewan, 141-51, 175-76, 185. See also Selective rationality; Selective responsibility Strategic behaviour, in theory: constraints upon (see Rules of the game, Crown-corporation organization designs); opportunity, for bureaucratic actors, 21-22; opportunity, for Crown corporation managers, 20-21; opportunity, for private-sector corporate managers, 17-18; opportunity, for political

232

actors, 21-22; selective efficiency, 35, 43; selective rationality, 39—40, 46^49; selective responsibility, 37, 46-49 Strategic decisions: defined, within the M-form, 7-8, 30-31; positively defined, 42. See also Substance of decision; Short-list (strategic decisions) Strategic planning: and the Crowncorporation financial management action channel, 41; within the Mform, 17-18. See also Corporate strategic planning (Crown corporations) Substance of decision: and cabinet decision-making styles, 159, 16063; in the M-form, 11, 30-31; positively defined, 41^42. See also Cabinet decision-making styles; Decision categories; Short-list (strategic decisions) Thatcher, Ross W., 117 Theory of the firm: and the calculus of instrument choice, 11; optimal balancing of autonomy and control and concepts of marginal utility, 16-17, 27-30, 31-32 Thomas, Paul G., 88 Transactions costs concept, 11. See also Theory of the firm Trebilcock, Micheal J. bureaucratizing effects of C-24 legislation, 14-15; decision perspective of bureaucratic actors, 35, 37-38; decision perspective of political actors, 37; economists' self-interest postulate, 34; government gamesmanship framework, 34-35; ideological explanators of instrument choice, 153; information processing and gamesmanship, 43; ownership claims and monitoring incentives, 20; political incentives for efficient Crown-corporation management, 20, 37; rules of the game, 44-45; selective responsibility, 45 Tupper, Allan, 62, 63, 72 Tupper, Allan, and Doern, G. B., balancing of autonomy and control, 5; control of federal government Crown corporations by the House

INDEX

of Commons, 13; federal government Crown corporations and "home" portfolios, 15, 158; federal government Crown corporations and "related policy processes," 25 Tupper, Allan and Pratt, Larry, 70 U-form. See Unitary form of corporate organization Unitary form of corporate organization: control-loss within, 10; defined, 7-8; gives way to the M-form, 8. See also Centralized organizations; Multidivisional form of corporate organization Vertical-information-systems Crowncorporation organization design: defined (rules of the game), 47-48; information advantage, 47—48; in practice (Manitoba), 113-14, 160, 167, 172-75, 184; locus of decision, 47; strategic behaviour, 48;

substance of decision, 48; winners and losers, 48 Vertical information systems organization design: transactions costs logic, 9-10; information overload within, 16; optimization criteria, 29 Vote maximization, utility; maximized by political actors 37, 48. See also Political actors Warrack, Allan, 65 Williamson, O. E.: the agency problem and managerial theories of the firm, 17-18; implicit balancing of autonomy and control in the M-form, 30-31; how the M-form counters the control loss of the U-form, 10-11; the M-form hypothesis, 7-8. See also Multidivisional form of corporate organization Wolff Commission. See Crown Investments Review Commission (Saskatchewan)

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