Welcome to the Winter 2014 issue of the Network Industries Newsletter, which is dedicated to the topic of “Business Groups in Network Industries”. Business groups are generally understood as collections of heterogeneous companies tied together by formal and informal links and are distinguished in the management literature as a unique organisational form differing from stand-alone companies. Business groups can be holdings, conglomerates or corporate groups and are particularly widespread in the network industries. The winter issue presents three articles discussing the functioning of business groups in the specific conductions of network industries. Its goal is to present the theoretical framework on business groups indicating the dimensions of their functioning as well as to confront the theory with some practical illustrations and cases. This issue also intends to open a wider discussion on the role, benefits and shortcoming of business groups operating in Europe and worldwide.

In the first article Maria Aluchna using the examples of four cases from Poland discusses the characteristics of business groups and indicates the potential benefits they offer to network industries. The second contribution is delivered by Jana Pieriegud who analyses the evolution and organizational forms of corporate groups in the rail freight sector in Poland focusing on the strategies of PKP Cargo Logistics Group and CTL Logistics Group are discussed. FinallyMiroslav Stojsavljevic in the third article presents the example of Serbian water management companies acting as a specific business group addressing the functioning of public companies dealing with natural resources and showing the complexity of this form of economic activity.

We hope that you find the contribution interesting and inspiring for future studies both on business groups and on network industries.

Corporate governance of public utilities

In recent years, corporate governance has been one of the most discussed issues among authorities, politicians, business people, scholars and commentators. Although this attention is particularly due to well-publicized governance failures and subsequent regulatory changes, this topic is an area of longstanding interest. OECD (2004) defined it as a set of relationships between a company and its stakeholders. Corporate governance provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.

In public utilities corporate governance assumes a much more complex and relevant role than in other companies: market regulation, public-private ownership, political connections and multiple agency relationships may change the company’s objectives and relationships, arising critical and interesting questions.

This issue of the Network Industries Quarterly will look at different aspects of corporate governance of public utilities. De Masi and Paci analyze the role of independent directors, focusing on corporate governance codes and independent directors’ influences over corporate objectives. Menozzi and Vannoni discuss the issue of politically connected directors, their role and their value for firms dominated by state shareholders. Smith, Thompson and Wright instead, debate the role of the governance mechanism ‘Say on Pay’, comparing UK utilities and non-financial companies. Cambini, Gugler and Rondi examine the dividend policy of EU telecommunications and electricity industries, showing differences between the sectors.Miriello and Castelnuovo study the mergers and acquisitions (M&A) activities in energy networks, looking at the effects of different owners on investment propensity.

Regulating Railways

The rail sector in Europe like other network industries is in a process of organizational restructuring that is part of different forms of liberalisation as well as de- and re-regulation. In this process many approaches to railway regulation are reassessed. Achieving more, better and more cost efficient rail services for freight and passengers is a commonly shared goal, but there are different opinions on the right policies to achieve this goal. Th is issue of the Network Industries Quarterly will look at different aspects of rail regulation with examples from in and outside the European Union.On the example of the Swiss rail reform Desmaris looks at the relationship between competition and performance. Kuligowska describes the recent reforms that the Polish rail regulator had to undertake when dealing with open access provision. Laroche discusses the issue of congestion of railway lines and how saturation of rail infrastructure can be modelled. Thiebaud & Amaral look at how prices influence coordination in the rail sector. Peña-Alcaraz et al. present an alternative view on capacity pricing in open access rail systems on the case of Tanzania.

Consumer Involvement in Network Industries’ Regulation

This issue of Network Industries Quarterly focuses on the question of consumer involvement in the regulation of the network industries, a topic we have not addressed so far. The issue features four unique contributions, all especially written for this issue. They are based on presentations made by the four authors during the ACCC/AER Regulatory Conference 2013 held in Brisbane on July 25th and 26th 2013, and whose special focus was precisely on “Consumer involvement and pricing”. We would like to take this opportunity to thank the Australian Competition and Consumer Commission (ACCC) for having organized such an interesting conference and the authors for having agreed to write up their presentations for this newsletter.