The Conflict of Public and Private Interests in Mixed-Capital Joint Stock Companies in Brazil

This paper is based on doctoral research that describes Brazil’s mixed-capital joint stock companies (MCJSC) and discusses the tensions between their public and private objectives. MCJSC are a kind of State-Owned Enterprise... [ view full abstract ]

This paper is based on doctoral research that describes Brazil’s mixed-capital joint stock companies (MCJSC) and discusses the tensions between their public and private objectives. MCJSC are a kind of State-Owned Enterprise (SOE) and encompass some of the largest companies in the World. Nevertheless, research suggests that this kind of company has been little studied in the disciplines of strategy, management or public management. We discuss how the inherent misalignment between the public and private natures of MCJSC has the potential of creating conflicts of interest among the principal stakeholders and the possibility that agents must answer to multiple conflicting principals. We employ four theories to investigate potential conflicts and how they are handled by MCJSC. Agency theory, since its beginning, has been concerned with principal-agent conflicts. Nonetheless, in assuming the pursuit of purely rational-economic interests by principals and agents, it appears to be based on an excessively limited view of human nature. Stewardship theory, which considers a broader range of individual interests, can serve as a complement to agency theory, opening the possibility of alignment of individual interests under certain circumstances. Stakeholder theory provides support for investigation of conflict of interests at the organizational level, and a considerable body of research has looked at how companies deal with diverging demands from their multiple stakeholders. Finally, we argue that institutional theory is appropriate for understanding and explaining the relationship of MCJSC with their institutional environment, permitting analysis of the mechanisms and structures through which MCJSC deal with their public-private tensions in attempting to balance and/or resolve them. We argue that dialogue among these theories is possible, although they operate at different levels of analysis, in view of their converging and complementary aspects. Qualitative, multiple case-study research is being conducted in five of Brazil’s major MCJSC. These companies operate in five different industries and some of them operate internationally as well as domestically. The largest, Petrobras and Banco do Brasil, are well positioned on the Forbes list of the 2000 biggest companies in the world. Data is being collected by means of semi-structured interviews, document analysis and participant observation. Qualitative techniques of analysis are employed, with the aid of Computer Assisted Qualitative Data Analysis (CAQDAS) to support theoretical development and conclusions. We argue that research into the conflicts of interest inherent to MCJSC and how they are managed is a topic of relevance to both researchers and practitioners, given the lack of research in this area and the relevance of the companies being studied and the paucity of investigation. It is expected that this work can bring new insights to the theories being used and to the management of public-private relationships by governments and business firms alike.