ARPA / /June

Beckett GOVERNMENT
2000 SHOULD RUN LIKE A BUSINESS

THE “GOVERNMENT SHOULD

RUN LIKE A BUSINESS” MANTRA

JULIA BECKETT
University of Akron

The common phrase, government should run like a business evokes powerful ideas: It is a mantra.
This article considers the layers of connotation contained in this mantra, noting first that compari-
sons between government and business is a classic and constant theme in public administration. In
recent literature, the theme and focus of business-government comparisons has shifted to modeling
government after the market ideas of business. This article adds to this discussion by considering
formal constitutive factors present in three basic business forms—the sole proprietor, the partner-
ship, and the corporation. The article further asks whether any of these business forms provides use-
ful models for government. A fundamental concern is conceptualizing government within the con-
text of America’s business mythology that echoes in the mantra, “government should run like a
business.”

The business of America is business.

—Calvin Coolidge

What others see, and we often do not, is that business has an unusually power-
ful influence on the behavior, the attitudes, the beliefs and the perceptions of all
Americans. Business is central to our lives. We have an extensive business
mythology: businesses, business people, the fortunes made from business fig-
ure largely in the stories we tell of American heroes and heroines. Business has
a central role in our interpretations of our national past.

—James Oliver Robertson (1985)

In our age of sound bites and video clips, a well-turned familiar phrase can be
influential. Many American images and phrases reflect business influences, or,
as Robertson calls it, “business mythology” (1985, p. 4). Government should
run like a business is a phrase that evokes powerful images and ideas. Govern-
ment and business have long been compared, but it seems the current iteration is

Initial Submission: November 10, 1998

Accepted: December 17, 1999
AMERICAN REVIEW OF PUBLIC ADMINISTRATION, Vol. 30 No. 2, June 2000 185-204
© 2000 Sage Publications, Inc.
185
186 ARPA / June 2000

a mantra. Although a common phrase can carry meaning that is open to interpre-
tation and extrapolation, it seems that the focus of the current government-
business comparison has shifted.
The mantra is now found in the popular press (Osborne & Gaebler, 1992) and
in politics (Gore, 1993, Marshall & Schram, 1993). It seems that if the mantra,
“government should run like a business,” is said often enough and sincerely
enough, then a transformation will occur. In discussions of market management,
business ideas are extracted, adopted, and applied to government. Concepts are
substituted; for example, owner replaces citizen and customer replaces client.
The idea of taxpayer is supplanted with the notion that government services are
exchanged for value. Governments are urged to be entrepreneurial or engage in
partnerships. What underlies many of these comparisons and writings is the
foundational government-business metaphor.
The mantra is associated with the widespread, enduring, new public manage-
ment (NPM) political reforms. These reforms, calling for managerial or
business-type approaches to government, are connected to origins in both the
Thatcher and Reagan administrations (Hood, 1991; Mascarenhas, 1993; Pollit,
1990). Some give 1979 as the start date of this political reform, which continues
to dramatically change governance, public administration, and public manage-
ment throughout many nations (Peters & Savoie, 1998).
The mantra has also entered the study of public administration theory and
practice, where it is most often connected to the NPM movement. This academic
movement is a broad approach to governance, based in part on a rejection of pub-
lic administration and bureaucracy and in part of finding better methods to man-
age practical problems of governance (Bozeman, 1993; Lynn, 1996). The public
management movement aspires to “‘making a difference’ in public affairs”
(McGregor, 1997, p. 153); this is true of the political reforms. Countries that
have instituted NPM reforms and techniques include Britain, New Zealand,
Australia (Hood, 1991), Canada (Aucoin, 1996), Israel (Galnoor, Rosenbloom, &
Yaroni, 1998), Finland, and Sweden (Pollit & Summa, 1997). Kettl (1997) calls
it a “global revolution in public management.”
The mantra has been used in the past to elicit reforms. During the municipal
reform movement era (1895-1910) and the Progressive era (1910-1920), the
phrase was also evoked. The purpose of the mantra in the Progressive era was to
increase community political action by encouraging citizens to consider them-
selves active owners of the municipal corporation (Schachter, 1997; Stillman,
1974). The mantra is associated anew with political reforms of the global
NPM—but perhaps modern viewpoints on the government-business compari-
son have changed its meaning.
“Government should run like a business” is both a phrase and a metaphor.
Common phrases contain layers of connotations, and they tacitly include values
transmitted and received. The fact that a phrase evokes multiple ideas is part of
its power. Morgan (1997) has demonstrated how metaphor is intrinsic in our
understanding of organizations. Lakoff and Turner (1989) note how, in cognitive
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 187

linguistics, metaphors are essential to understanding but can also lead to misun-
derstanding. Further, in the political and social realm, there may be fundamental
misunderstandings of common images based on individuals’conservative or lib-
eral worldview (Lakoff, 1996). Metaphors, symbols, and phrases are both
abstractions and social convention (Yanow, 1996); therefore, it is worthwhile to
consider a phrase in common use.
The analysis of the mantra begins with breaking it into parts and focusing on
different meanings of government and business. Government includes federal,
state, and local government systems and structures. As a starting point, business
means a firm, company, or economic entity that produces or provides goods or
services for profit. But this definition of business seems to cover broad catego-
ries. There must be ways to refine and clarify. The word should is distinctive and
imperative; it is a directive. The simile should run like is not a simple compari-
son. Instead, it makes business an exemplar. There are a multitude of definitions
and imagery for run, including to go fast, to compete, to operate, or to have a cer-
tain form. The mantra makes business an exemplar for government, and this arti-
cle analyzes this business identity.
Government and business have been compared and contrasted throughout
public administration literature. To trace this connection would involve tracing
the history of public administration. This article suggests that variations exist in
what is meant by business in classic public administration literature. Current
public management writings also have variations on what business means, and
the critiques challenge whether the business comparison is appropriate. How-
ever, it appears that language in current writings reveals a shift in the compari-
son regarding business forms; this includes references to partnerships and entre-
preneurs. Accordingly, this article will explore the conceptual frame of business
forms, rather than production management or executive control, to discuss what
it means to run like a business. The three general types of business forms—the
sole proprietor, the partnership, and the corporation—will be analyzed. During
the discussion of these structural types of business, the expectations of business
will be compared to expectations of government.

CLASSIC AMERICAN THEME

Tracing the comparison of business and government would be to trace the

history of public administration. Linking government administration to business-
like practices was present in works of Wilson, Goodnow, and White in the early
orthodox era of public administration (1880-1920). The “government should
run like a business” mantra can be seen as a continuation and slight variation of a
classical theme that stressed adopting business-like approaches to government
to provide economy, efficiency, and professional administration.
The approach of “administration as the business of government” deals more
with business being an activity of organizing resources in order to produce and
188 ARPA / June 2000

distribute goods and services of society. The operational commonality between

government and business is a foundation of organization theory. Organization
theory as it has developed, whether generic, systemic, or humanistic, has tended
to look at large entities and consider the administrative and managerial aspects
of production or the executive power aspects of decisions.
In most discussions, the organizational entity is assumed to be a business. It is
typically called the organization, but other nomenclature for the entity includes
“industry” (Taylor, 1916/1996); “body corporate” (Fayol, 1916/1996); “enter-
prise” (McGregor, 1957/1996) and “firm” (Cyert & March, 1963). The entity is
assumed to produce goods or services. The entity is assumed to produce goods
or services. Often the value measure of how good the organization is is either
control or efficiency. In discussions, the term business is generically abstracted
and normatively idealized. It is not clear that businesses really have the attri-
butes ascribed to them.
Public administration theorists have questioned the generic approach and
have asserted a distinctive role for government. As a generic approach to organi-
zation was being proposed, public administration writers, even the early pro-
gressive reformers, enunciated their views of “citizenship, common good, [and]
institutional legitimacy” (Green & Hubbell, 1996). Public interest elements
make government distinctive (Appleby, 1945; Herring, 1936). Comparing gov-
ernment with all other forms of social action, Appleby concluded that govern-
ment is different because it was the public’s business. Works comparing and
contrasting government and business shifted the terminology to public and pri-
vate. As captured in Sayre’s dicta, “Public and private management are alike in
all unimportant respects” (Allison, 1982).

COMPETITION AND CHANGE

The “government should run like a business” mantra can be interpreted as an

extension of the classic generic contrast of business and government, but this is
incomplete. Political economy and public choice theories also juxtapose busi-
ness and government. Sometimes in political economy discussions, these com-
parisons of business and government regard participation and resources
(Niskanen, 1971). Often these comparisons do not differentiate government as a
distinctive actor, but just another entity in the marketplace.
Public choice applies business ideas of exchange and self-interest to govern-
ment (Buchanan & Tullock, 1962). The economic assumptions of the market
draw attention to and compare revenue and profits. Comparing fiscal resources
between business and government does not translate well. Businesses raise capi-
tal as investments, with expected profitable returns; governments raise revenues
through taxing powers to pursue activities for the public good. These revenue
categories of business exchange and sales are equated with government revenue
from fees for services. The revenue sources, although they are often contrasted,
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 189

are not evenly paired. Efficiency is a further comparison, but business or eco-
nomic firms ideally have net efficiency, and this is rare for government. Effi-
ciency in business is focused on maximizing profits or the bottom line, and effi-
ciency in government has focused on minimizing costs.
The “government should run like a business” mantra is associated with mar-
ket economics in both strands, the political reform and academic studies, of
NPM writings. Although the mantra seldom is advocated as such, it is worth
considering whether the meaning of the term business has shifted in this area.
Works clustered under the public management movement are varied and diffuse
(Bozeman, 1993; Lynn, 1996; Newland, 1994), but many of them adopt the view
that competition, business competition in the market, is the basis of comparison
between government and business (Behn, 1998; DiIulio, 1994). Within the
NPM, works connected to reforming the national government advocate govern-
ment change by reinventing, reengineering, and privatization (Hood, 1991;
Kaboolian, 1998). The initial point is often that the classic bureaucratic model
needs to be changed (Hood, 1991; Mascarenas, 1993). The fact that the classic
politics-administration dichotomy and classic Weberian bureaucracy have long
been challenged and discredited is often irrelevant.
Some interpret the mantra to mean that government should compete like busi-
ness. In this view, competition is viewed as a catalyst for business. Customers
are better served by competition. Innovations and improvements in services,
techniques, and products come from competition. Obsolete and inefficient prod-
ucts and services are disclosed and superseded through competition. In this
viewpoint, competition is a causal agent for progress; government should com-
pete like successful businesses and reap similar rewards. Although these are the
popular exhortations (Gore, 1993; Osborne & Gaebler, 1992), the more recent
works are more measured.
The need to change and improve government performance and results has
been considered essential; this is the message of the National Performance
Review. The 5th-year report card indicates that there are improvements but that
there is much to be done (Kettl, 1997). To achieve the change in performance and
results, the comparison again is government and business. Models and ideas for
the NPM have come from business and business literature, but rather that an idea
of business being a firm or a corporation, it is business practices and techniques
that are examined. Foremost is the elevation of the place of the market and the
idea of competition and exchange (Gore, 1993). Thus, the beginning point is less
the structure and interorganizational relation of business and more a considera-
tion of business as a seller and supplier in the marketplace. A critique of this
approach holds that it ignores the constitutional basis of our government (Moe,
1994).
The ideas of successful market exchange and competition are part of the
change in the view of business to which government is compared. NPM is based
on “enterprise economics” (Ross, 1993), which considers commercialism,
190 ARPA / June 2000

competition, and risk taking as beneficial. This focus in public management has
been called market-driven management (Terry, 1998). The NPM is bolder when
it posits that the current models and practices are outmoded (Barzelay, 1992;
Moore, 1996), and new models and new approaches are essential to adjust to
present and future demands. The questions of input, output, and measurement
are central in searches for efficient performance and results, but the measure and
emphasis should be on results.
Another view is that the grounding for NPM literature is eclectic, catholic,
and varied but still the predominant theoretical grounding coming from eco-
nomic or political economy paradigms (Behn, 1998). It emphasizes market
exchange language, measures, and mechanism, where ideas reflecting the senti-
ment that “government should compete or get out of the way” are studied under
categories of privatization (Finley, 1989; Kettl, 1993) and of deregulation within
government (DiIulio, 1994). It emphasizes new techniques invented or adapted
to fit the situation through reengineering (Thompson & Ingraham, 1996) or
innovation (Altshuler & Behn, 1997). As part of these discussions, business
entrepreneurships and partnerships are included as practices and techniques for
improvement. This inclusion of other business forms departs from, and perhaps
expands, the meanings of the business entity.
The nature of the comparisons between government and business and its
implications has also been questioned as a paradigm shift. Lan and Rosenbloom
(1992) have argued that a conservative political shift has led to the predomi-
nance of the economics-based approaches to governance in which business is
given supremacy. Reschenthaler and Thompson (1996) argue that this approach
is a new economics of organization, based more on technological advancement,
in which neither form of entity, business or government, have preeminence.

The new public managers reestablished a kinship with business management, not
because business was better than government, but because managers in both sec-
tors once again faced similar problems and opportunities and the business manage-
ment literature was full of interesting ideas that seemed relevant to meeting new
challenges. (p. 140)

Whether there is a paradigm shift or a renewed emphasis on market economics,

it seems the borrowing of business ideas in the recent public management litera-
ture and NPM political reforms do place business as an exemplar.
Often, the shift in the NPM literature promotes the positive attributes of busi-
ness, particularly the aggressive, risk-taking entrepreneurial businesses. These
enterprises are viewed as high achievers through innovation and lowered costs.
This view of competition seeks victory over limits. One writer suggested that
government administrators should just ignore the rules and laws that constrain
them: “Indeed, inertia is the most serious malady plaguing public organizations.
As a result, achieving success often involves circumventing or subverting politi-
cal and institutional obstacles to innovation” (Levin & Sanger, 1994, p. 269).
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 191

This NPM literature has gathered serious attention and pointed criticism. Pri-
vatization is criticized for incomplete application of economic theory, often
emphasizing benefits without recognizing the cost (Thayer, 1991). One criti-
cism from Rosenblum (1998) relates to defining values: “The NPM [new public
management] would remake public administration in the image of business,
apparently without recognizing the degree to which the Constitution places sub-
stantive, procedural, and organizational constraints on government that simply
do not apply to private enterprise” (p. 1). Other critiques of these writings
involve government and public interest considerations—administrators’
responsibility to the public, their duty to enforce the laws, and the necessity to
work within the system to improve practices or provide redress.
Other public management writers analyze critically the general claims to
business predominance in certain situations. DiIulio (1994) begins his discus-
sion of deregulation with the following:

The nation’s federal, state, and local public service is in deep trouble. Many gov-
ernment agencies cannot attract and retain first-rate executives, managers, and line
staff. Most do not operate in a way that inspires public confidence. In reaction,
some observers say “privatize everything” others deny that serious problems exist,
and still others chant “run government like a business.” (p. 1)

But DiIulio’s next sentence is, “All three responses are misguided.” Behn cau-
tions, “In the United States it has become fashionable to worship the techniques
of business management and seek to implement them in government” (1997,
p. 3). Then, Behn analyzes innovation based on the purpose of improving gov-
ernment agencies’ performance, not just the innovation of anecdotal business
success. The NPM brings in different business ideas and practices than the clas-
sic comparisons; in addition to suggesting management techniques, additional
business forms—entrepreneurs and partners—are part of the discussions. This
public management literature also raises tensions about business.

WHAT KIND OF BUSINESS?

A literal interpretation of the “government should run like a business” mantra

builds on the assumptions that business is good and government is lacking. This
is the part of the slogan where somehow business has become the benchmark and
standard. Perhaps this is a victory of public relations skills, or perhaps it is
romantic idealism. Saying that government should run like a business may indi-
cate a popular understanding of business as efficient, productive, and profitable,
but it was not so long ago that business, or at least big American business, was
suspect (Burke, 1999; Robertson, 1985). What, then, is meant by business?
What is presented as proofs that business runs well? Reports of the success
and failure of businesses are often selective or anecdotal (e.g., Peters &
192 ARPA / June 2000

Waterman, 1982). Current data paint broad pictures roughly indicating that for
each 2 business starts, 1 business fails; the ratio for 1994 was 1 failure per 2.63
starts, and the ratio for 1995 was 1 failure per 2.36 starts (Bureau of Census,
1998, Table 853). What is not clear is why these businesses fail. Many business
management books start with the premise that there is considerable room for
improvement in most businesses; Japanese management and Demming methods
promote the improvement of established business practices (Walton, 1986).
There are many prescriptions in the business management literature, but what is
common or acceptable business practice? Modeling government after individ-
ual examples may not translate well, the exhortations continue.
Whatever reasons there are behind the preeminence of business, government
is compared to it. But it is not clear what is meant by business. The term business
is used in a multitude of ways, shapes, and forms. Big business, or corporate
business, often is distinguished from farmers, small businesses, and entrepre-
neurs. The large corporations—in power and impact on the national econ-
omy—are commonly cited as evidence of the dominance of business (Berle &
Means, 1932; Kaysen, 1996).
In many discussions, not only are organizations generic but the “generic”
business type is assumed to be a large corporation. This presents problems.

Earlier, the large corporation was described as the characteristic institution of our
market economy. So it is, but it is hardly the representative one: the typical busi-
ness is not organized as a corporation, but rather as an individual proprietorship or
a partnership. In 1990, the latest year for which statistics are published, a total of
20.0 million nonfarm businesses reported to the tax authorities: 16.3 million pro-
prietorships and partnerships, 3.7 million corporations. The corporations
accounted for 90 percent of the sales and receipts reported by all business firms.
The were some seven thousand corporations with assets of $250 million or more,
the largest class demarcated. These accounted for more than half (51 percent) of
the total sales and receipts of all businesses. Large corporations were most domi-
nant in manufacturing (2,602 with 74 percent of sales), utilities and transportation
(716 with 76 percent of sales), and finance and real estate (1,503 with 71 percent of
sales). (Kaysen, 1996, p. 5, footnote omitted)

Recent works considering corporate businesses have analyzed these entities

with criteria constituting ownership and control (e.g., Blair, 1995; Hansen,
1996). Without distinguishing by the structure or type of business form, Benn
and Gaus (1983) analyzed private and public organizations using constructs of
agency, interests, and access. The definitions of these constructs is worth noting:
Agency indicates on whose behalf a person is acting; interest relates to who is
affected or who benefits; and access denotes openness of activities and informa-
tion. Bozeman (1987) used criteria of economic power, political power, and
social constraints to compare public and private organizations. A recent twist of
the generic organization approach is in Bozeman’s argument that all organiza-
tions are public, but again, the business structure or form was implicitly
corporate.
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 193

What is lacking in many of the government and business comparisons is con-

sideration of either defining what a business is and in differentiating forms of
business entities (Yates, 1985).
Defining the terms to evaluate “What is business?” is a significant inquiry.
“The questions we ask about business are how to do it, or how to control it. Not
where did it come from or why do we have it” (Robertson, 1985, p. 3). The how
to do business and how to control business are adapted in the classic view of a
business-like public administration.

THREE BUSINESS FORMS

A fundamental question in considering government should run like a busi-

ness is: What kind of business are we talking about? This section will examine
the three major business forms: the sole proprietor, the partnership, and the cor-
poration. “Minor” forms of business not considered here include: limited part-
nership, joint venture, association, foundation, and consortium.
What are the empirical data and sources that consider these three business
forms? This section considers established legal doctrine relating to defining
factors for the major business forms. The definitions and criteria were developed
over decades of practice, much of the doctrine are extrapolated from case
analysis of how judges analyze and trace decisions within the common law
framework. Analysis of business through form, including ownership, invest-
ment, profits, risks, and decision structures is common in legal doctrine; in law,
business entities have rights, obligations, and powers.
This section also will consider the following structural or constitutional busi-
ness elements: the ownership of business assets; receipt of income from the
business; the responsibility for risks and obligations; and the decision authority
and control. These are summarized in Table 1.

Sole Proprietorship
The first and simplest business form is the sole proprietorship (Haynsworth,
1985; Kostant, 1996). From 1980 to 1994, it was the most common business
form in the United States (Bureau of the Census, 1998, Tables 833 and 834). The
business plans, decisions, and information are in one person. That individual
invested the capital, owns the assets, and receives the income and profits. That
individual is responsible for the obligations, debts, and risks. The individual
maintains secret and discrete business information.
A sole proprietorship is considered old-fashioned and basic. There are no
particular founding requirements, so if someone wants to start a solely owned
business and holds himself out to the public as being in business, then the state
and the courts recognize this (Kostant, 1996). There is a certain romanticism
about sole proprietors—consider the neighborhood shoe repair shop or the
194

TABLE 1

Capital Risk and

Business Type Ownership Investment Profits Liability Decisions
Sole proprietor One person Single owner Complete Complete and personal Complete and sole control by one person

Partnership Two or more Shared by Shared by Shared by partners and personal Either or both persons can make decisions that bind.
persons partners partners Can be based on verbal or written documentation.

Corporation Multiple persons Contributed by Dispersed and To the entity. The risks of the By the entity. Decisions and operations are governed
or entities formula of distributed business are borne by the by formal articles of incorporation and must be
shares by shares corporate entity. There is limited filed with the state. Separation of normal decision
liability and risk to owners making from ownership. Operations are in control
of shares. of an elected board and appointed executives.
Control is based on a vote per share at meetings
on general policy and directions.
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 195

sculptor who has her own studio. We attach ideas of creativity, craftsmanship,
and personal effort to these businesses. They are often small and local and have
the allure of the entrepreneur.
The sole power, assets, and control are equated with the ability to act quickly,
decisively, and efficiently. Entrepreneurial spirit also denotes a big stakes
approach with possible high rewards with attendant high risks of failure. Sole
proprietor businesses may grow and expand to have many employees and
hierarchies, but there is one ultimate authority that resides in a living, breathing
human being. As the business becomes more complex the sole proprietor form is
discouraged; often the tax and legal advice is to incorporate for to shield assets
from risk and liability and to reap tax benefits (Haynsworth, 1985). The unitary
nature and the high risk go against type for government, which is expected to be
collective, inclusive, prudent, and conservative.What are the empirical data and
sources that consider these three business forms? This section considers
established legal doctrine relating to defining factors for the major business
forms. The definitions and criteria were developed over decades of practice,
much of the doctrine are extrapolated from case analysis of how judges analyze
and trace decisions within the common law framework. Analysis of business
through form, including ownership, investment, profits, risks, and decision
structures is common in legal doctrine; in law, business entities have rights,
obligations, and powers.
Government and sole proprietorships share links to American individualism.
The paradox is that we often associate organizational actions with an individual
as if that person has sole power and authority. We link administrative actions to a
president, a manager, or an administrator with an executive title. The indepen-
dent business owner does not translate well. Consider an example: The owner of
the coffee shop down the street opens his store on an irregular schedule. Most
weekday mornings, he opens sometime after 9:00 a.m.; on some weekdays, he
does not open it at all. His arbitrary hours suit him. He may lose some customers,
but his regulars understand and appreciate this idiosyncratic approach. This uni-
tary power expected in business violates both the republican structure and the
democratic ideals of American government.

Partnership
In a partnership, at least two individuals form the business; they own the capi-
tal and they split the income and profits. The partnership is a cooperative,
profit-motivated effort of living, breathing people. The framework of relation-
ships, rights, and expectations is well established (Kleinberger, 1995, p. 201;
Mayers, 1969, p. 2). Partnership business, with attendant legal rights and liabili-
ties, dates back to ancient Rome (Mayers, 1969); Britain had a partnership stat-
ute in 1890. In 1914, American lawyers promulgated the Uniform Partnership
Act to standardize the rights and obligations of business partnerships.
196 ARPA / June 2000

Rights and obligations of partners reflect the combined and ongoing effort of
individuals (Kleinberger, 1995, pp. 201-202). One partner can bind all the other
partners to a deal, and this makes each partner responsible for the results of any
partner’s actions or debts. This requires cooperation and collaboration between
individual partners, and it also demands vigilance and oversight regarding part-
nership actions. Partnership decisions and information are controlled within the
firm and are not disclosed to the public.
Partnerships can be established with a handshake; no formative written docu-
ments are needed. If two or more individuals hold themselves out to the public as
being in business, then the state and the courts recognize the partnership. Part-
nership form is frequent when individual business owners’ identities, skills,
abilities, reputations, and efforts are connected with providing services. The
type of business activities where parterships occur are in trade, finance, insur-
ance, and general service businesses (Haynsworth, 1985: Kleinberger, 1995).
However, for the years 1980 to 1994, the partnership is the least common busi-
ness type behind both proprietorships and corporations (Bureau of the Census,
1998, Tables 833-834).
Partnerships can be enormous and bureaucratic. For instance, accounting and
law firms sometimes have from dozens to more than a hundred partners. Again,
the standard advice for large partnerships is the transformation into corporations
based on consideration of taxes, liabilities, and control issues (Haynsworth,
1985).
The variety of uses of the term partnership in public administration literature
is not consistent. Partnership is used as a euphemism for dispersing or shifting
responsibility, a type of agency relationship, and a technique. Partnering is a
management strategy for achieving goals (Berman, 1998) or for reducing the
size of government (DiIulio, 1994). Other public partnership discussions relate
to contractual relationships or agreements regarding service delivery, such as
trash collection (Kettl, 1993). The analogy of the partnership in public admini-
stration and government often means shared interests in common goals, and as
such, it only partially meshes with the business partnership form.

Corporation
The third business type, the modern corporation, dominates American busi-
ness (Berle & Means, 1932; Blair, 1995; Kaysen, 1996; Kostant, 1996). The
business corporation is (a) established by founders, (b) has an identity, (c) has
existence independent of the people who own it, and (d) has an indefinite exis-
tence. The corporation’s founders determine the powers, duties, and responsi-
bilities in the formative documents, particularly the articles of incorporation,
that must be filed with the state. Unlike a sole proprietorship or partnership, the
corporation is not an entity until a state recognizes it, and then the corporation is
considered a distinctive legal person independent of human individuals who
own or operate it.
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 197

Corporations became the dominant business form of the modern industrial

era, but variations on the corporate form seem limitless: Corporations can be
small and local, or large multinational conglomerates (Blair, 1995). They may
have thousands of publicly traded shares and may disclose reports to the public.
They can be a close corporation where there are a handful of owners; shares are
not openly traded and there is no minimum public disclosure. Another peculiar-
ity is that corporations can exist without any human owners (Dan-Cohen, 1986).
Founders mold and form a legal creature. They give it a life and powers of its
own. It goes out into the world, and it is shaped and constrained by social forces.
The effect of a corporation as a distinct entity is something akin to Frankenste-
in’s monster. However, there is debate whether the better characterization of a cor-
poration is a fictional person, a reale Verbands-persoenlichkeit, a social entity, a
bundle of property rights, an organicist collective, or a corporate actor (Tuebner,
1988). The collective or group effort characterizations emphasize internal rela-
tionships, and they are less concerned with objective or generalized factors
(Bavly, 1999; Tuebner, 1988). As a matter of legal policy, two dominant lawyer
groups accept the corporation-as-legal-person viewpoint: The American Bar
Association (1998) adopted the Model Business Corporation Act in 1953, and in
1994, the American Law Institute, through 14 years of drafts and committee
work, produced the Principles of Corporate Governance (Hansen, 1996).
Public responsibilities attach to the corporate person, and Bozeman (1987)
concluded that these obligations make these organizations public. Bozeman’s
public aspects of organizations are, in effect, a restatement of corporate person
being subject to law and to citizenship obligations, such as paying taxes or com-
plying with health regulations. The idea of citizen corporation is extended now
in the advice to become the “neighbor of choice” as community citizens (Burke,
1999) and to be more responsible and accountable to the community (Bavly,
1999). Others suggest corporations should actively be good neighbors because it
is good for operations and profits.
In the corporation, ownership attributes of capital and responsibility are
separated and apportioned between shareholders and management (Berle &
Means, 1932; Blair, 1995; Kaysen, 1996; Kostant, 1996). In this fragmented
ownership, shareholders’ rights and responsibilities are determined by constitu-
tive documents, either in the articles of incorporation or bylaws or in the stock
itself; state and federal laws provide some minimal ownership rights. In legal
challenges, courts routinely limit shareholder participation to the defined rights
of annual meeting attendance and of voting for officers. Information and deci-
sions about operations are held by the board of directors and management.
Shareholders are called the owners of the company, but they have limited par-
ticipation in decisions based on financial power. Voting power is based on
wealth invested where one share gets one vote. Profits are also distributed
according to ownership of shares. These are accepted private sector, economic
man values. The words shareholder, stakeholder, and customer also reflect prop-
erty interests and financial power. Government’s embrace of these wealth-based
198 ARPA / June 2000

power rules constitutes an infringement on fundamental precepts of democratic

governance.
In some limited ways, the legal requirements and voting mechanisms of cor-
porations are modeled on representational expectations of government. But cor-
porate democracy is not without critics.

In principle, the law is intended to give shareholders a significant amount of con-

trol. In practice, it does not always work out that way. Technically, shareholders
must regularly elect or reelect the board of directors, but shareholders cannot eas-
ily remove a director whose term has not expired, and shareholders do not, typi-
cally, participate in the nomination process of new directors.
Apart from the election of directors, the number of matters that must be submitted
to a shareholder vote is limited. (Blair, 1995, p. 69)

Corporate shares allow for ease in investments. Shareholders’ property rights

dominate concerns of control (Blair, 1995), and so if majority shareholders want
to buy out the minority shareholders, the courts routinely limit the inquiry to the
issue of fairness of price. Under fragmented and fungible corporate ownership,
the assumption is that displeased or dissenting stock owners will sell out. Using
Hirschman’s (1970) model, shareholders have the choice of loyalty, very little
voice, and the ability to sell; thus, exit may be a more powerful message to the
corporation (Blair, 1995, p. 98).
In Hirschman’s 1970 classic Exit, Voice and Loyalty, each of these terms is
considered as part of the response to decline in business firms and also in
government, and further, he considers customer or voter satisfaction to be as
determined by managers and politicians. Discussions on exit, voice, and loyalty
are approached from the view of management-received messages from market
exchanges. This means that exit and voice are often indirect and aggregate. Exit
is a means for the buyers in the market to indicate dissatisfaction, and sharehold-
ers are equated with buyers. Although this makes exit economically powerful, it
is also an indirect and diffused type of communication. Hirschman defines
political responses of voice as “any attempt to change an objectionable state of
affairs through appeal to higher authority” or through various types of action or
protest (p. 30). The discussion of voice is related to displeasure of quality;
although it is seen as political, it often is reduced to the gain or loss of votes.
Thus, voice and exit express displeasure with management. Furthermore, voice
is not seen as a normal ownership or citizenship action.
Shareholders are seen as investors with limited involvement and knowledge
of the corporation. Secrecy and privacy are other corporate expectations. Infor-
mation and decisions are considered important assets of the business that must
be protected, even from shareholders, because they have competitive value in
the market. Thus, at shareholder meetings, plans for future growth and business
activities do not have to be detailed; in fact, the tactic to hold annual meetings at
locations inaccessible to numerous shareholders is recommended if there are
contentious issues on the agenda. The democratic ideals of government have the
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 199

opposite expectation. With the Freedom of Information Act, the assumption is

that government information and decision processes should be open and sub-
ject to inspection and disclosure unless some compelling reasons for secrecy
exist.
The risk and responsibility of decisions and operation attaches to the corpo-
rate entity. These powers reside in the management team. Incentives and awards
to management based on production are accepted and encouraged. If chal-
lenged, the limited inquiry by the courts is whether this type of incentive
involves sound business judgment, not whether it allows for favoritism. This
business value does not transfer well to government. Government officers,
employees, and elected representatives are expected to put the public interest
first and to avoid conflicts of interest. Government has explicit and implicit pro-
hibitions on personal gain and advantage for those in power.

Government and Nonprofit

Corporate Forms Distinguished
Governments and nonprofit organizations often have corporate form and
name, but the form is distinct from that of the business corporation. The most
fundamental difference is public purpose. Government serves the public good in
numerous ways, but government must have legally defined powers found in con-
stitutive documents, enabling acts, authorizing statutes, and appropriation laws.
Municipal governments may be called municipal corporations, but as subsidiary
governments, they must have charters or state authorization and must comply
with established public purposes for their community. Nonprofit entities exist to
benefit society at large (Hansmann, 1996). Except to note that governments are
sometimes classified as nonprofit entities, the extensive variation in nonprofit is
beyond the scope of this discussion, (e.g., Hay & Engstrom, 1993).
The second difference is in the economic sense of owners and profits. In the
economic sense of business corporations, owners have two formal rights: to vote
as defined by the terms of stock ownership and to share the earnings (Hansmann,
1996, p. 11). Both government and nonprofit entities also lack the two economic
attributes of voting based on investment and distribution of profits.
Government ownership is distinctive, and it is used metaphorically. The con-
cept of ownership in a government corporation was used in the Progressive era to
encourage participation and to crack down on abuses (Schachter, 1997; Wein-
stein, 1968). In addition, this analogy was used as the corporate form was devel-
oped. The current disparity between the private shareholder powers in theory
and in practice indicates that promoting the analogy in contemporary public
administration is fraught with conflicts. Similar metaphors of stakeholders,
shareholders, partners, and owners are bandied about, but it would be preferable
to infuse the title “citizen” with the positive attributes.
Prominent differences exist between shareholders and citizens. Citizens are
required to pay taxes; they do not buy into the corporation in a set amount of
200 ARPA / June 2000

shares. Citizenship rights are, and should be, broader than shareholder rights
regarding participation in decision making. Stivers’s (1991) model for an active
and responsive citizenry asserts that citizen participation provides great value in
the quality of governance. People are citizens and residents. They do not have a
cash value or an exchangeable property right in their citizenship; instead, citi-
zenship imposes obligation onto the public.
This analysis shows numerous difficulties in business as a model for govern-
ment. Monolithic control of the proprietor and small group rewards of the part-
nership do not translate well to the social and community aspects essential to
democratic government. Fragmented ownership, wealth-based voting power,
and the preference for secrecy are the three reasons that the corporate business
form is a flawed exemplar for government. Business, in each of the three major
types, serves better as a foil to government based on the expectations, traditions,
and criteria applied to each.

CONCLUSION

This article begins by quoting Robertson’s (1985) description of business

mythology in American life. Not only is our business mythology positive and
heroic, it is projected onto government. Business and government comparisons
are common in public administration, but the definition of these concepts has
varied over time. The current popular iteration of the business myth is expressed
in the “government should run like a business” mantra.
The business mythology that affects the beliefs and the perceptions of Ameri-
cans is expressed in phrases. Ideas expressed by clichés, slogans, phrases, and
mantras may be more than just words or phrases. The pervasive use of the mantra
“government should run like a business” suggests that it is more than an idiom
and that it may be a paradigm. Yanow (1996) explained the following:

[Some] use the word paradigm in the Kuhnian sense, to mean something akin to a
religious conviction that organizes one’s perception of the world. Paradigms are no
more interchangeable or ephemeral than convictions of other sorts. They are
“ways of seeing” or weltanschauungen (world views), conditioned by family and
community backgrounds, education, training, experience and so forth—but that
cannot be removed or replaced like a pair of eyeglasses. (p. 31)

Discussion or analysis of a phrase that reflects the business mythology is

problematic, especially if it involves ways of seeing or organizing perceptions
about government. What can be done is to provide information as grounds for
comparison and consideration. This article considered the three major forms of
business structures—the sole proprietorship, the partnership, and the corpora-
tion. There are expectations that go to the essence of what business is, and for all
three, the broad generalizations hold the following: Business is expected to be
 Beckett / GOVERNMENT SHOULD RUN LIKE A BUSINESS 201

self-interested and self-supporting. Business is expected to take chances and

bear the risks and rewards. Business is expected to keep secrets. Business rights
are based on property, ownership, and control.
The mantra projects business as the exemplar for government to follow, but
business expectations are not basic to government. Discussions of government
may address the responsibilities of the executive and the management, but they
go beyond this to consider the public. Analyses and discussions of government
denote the responsibility to the populous as part of the descriptive hierarchy and
interactive systems in government. New public administration (Bailey & Mayer,
1992; Marini, 1971) and the Blacksburg group (Wamsley et al., 1991; Wamsley
& Wolf, 1996) directed attention to democratic expectations of citizen participa-
tion. The role of citizens in a democratic society is a fundamental and constant
concern (Stivers, 1991).
The mantra comparing government to business reflects the influence of the
business mythology. It idolizes and projects attributes onto business. It places
business on a pedestal and makes it larger, bigger, and better than life. Thus,
business is an allegory. It is not real and it does not have to be real. When govern-
ment is compared to mythic business, it pales. Although we may have our myths
and we may need our myths, we need to separate the ideal from the real. Govern-
ment can certainly learn from some business practices and procedures, but cau-
tion and care are essential. In comparing business and government, we should be
selective in our choices and clear in our concepts.

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Julia Beckett is an assistant professor of public administration and urban studies at the Univer-
sity of Akron, where she teaches in the M.P.A. and urban affairs Ph.D. programs. Her research
interests include government formation, public finance, public law, local government debt man-
agement, and developer districts.