How Do Politicians Capture a State? Evidence from State-Owned Enterprises

This article discusses political state capture in the context of party patronage. Evidence of this is delivered from state-owned enterprises (SOEs) and the rotations of members of their management and supervisory boards. In this case, it is deemed that an interest group, which consists of politicians and representatives in the government administration, decides about the appointment and dismissal of board members through the corporate governance of SOEs and ownership policy of the state. We analyzed the scale and intensity of rotations in Poland of about twelve thousand joint-stock companies in the years 2001-2017 according to their ownership structure. We show that changes of managers and supervisory board members in state-owned enterprises are higher than in private companies and are related to political elections. We estimated that on average three months after a new government is formed, a peak of changes in the composition of boards is observed, though they are earlier in the case of a supervisory board. We conclude that this can be regarded as an example of state capture by politicians.

Automated summary

This article discusses the state of political capture in the context of party patronage. The evidence of this phenomenon is presented through the rotations of managers and supervisory board members in state-owned enterprises. The study concludes that politicians and representatives in government administration control the appointment and dismissal of board members through the corporate governance of state-owned enterprises. The findings show that rotations in state-owned enterprises are more frequent and politically influenced compared to private companies.