Why Performance Contracts for State-Owned Enterprises Haven't Worked

When privatization is not feasible or palatable, developing country governments seeking to improve the performance of state enterprises are often negotiating performance contracts with their managers. Many of these contracts have been put in place with World Bank assistance. Research shows that they rarely work. The author summarizes the rationale for performance contracts and the evidence against them and explores the reasons why they haven't worked. She concludes that since a well-designed and carefully enforced performance contract can be as politically costly as a well-designed privatization, performance contracts are not likely to be successful in countries that lack the political will to privatize.

Bibliographic Details

Main Author:	Shirley, Mary
Language:	English
Published:	World Bank, Washington, DC 1998-08
Subjects:	PUBLIC ENTERPRISES, PERFORMANCE CONTRACTS, POLITICS, CONTRACTS, EFFICIENCY, LABOR PRODUCTIVITY, STATE OWNED ENTERPRISES, STATE RESPONSIBILITY, PROFITABILITY, ECONOMIC INFORMATION, CONTRACT NEGOTIATION, INCENTIVES, PENALTIES, CONTRACTING, GOVERNANCE BANKS, BOARDS OF DIRECTORS, BUREAUCRATS, EMPLOYMENT, IMPORT TARIFFS, LEVEL PLAYING FIELD, MANAGERS, MONOPOLIES, OPERATING EFFICIENCY, PRIVATE ENTERPRISES, PRIVATIZATION, PRODUCTIVITY, REFORMS, RETURN ON ASSETS, STATE ENTERPRISES,
Online Access:	http://documents.worldbank.org/curated/en/1998/08/441600/performance-contracts-state-owned-enterprises-havent-worked https://hdl.handle.net/10986/11537
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