Flexible gender targets with mandatory reporting: introducing a governance innovation for accountability, public values and social sustainability Open Access

The underrepresentation of women in executive positions within the public sector has attracted considerable attention among researchers and policymakers (European Union, 2021; Marvel, 2021; OECD, 2024b; Sabharwal, 2015; United Nations, 2024). This issue challenges the core public values of social equity and equal opportunities, which are critical determinants of trust in and the legitimacy of public organizations (Baekgaard and George, 2018). With the global corporatization of public services (Landoni, 2018; Van Genugten et al., 2023), municipal-owned corporations (MOCs)—defined as majority-owned enterprises of municipal authorities (OECD, 2024a)—face heightened scrutiny. Characterized as hybrid organizations (Bruton et al., 2015), MOCs’ governance and accountability practices are affected by multiple values (Grossi et al., 2015). Normatively, key public values, such as social equity, should guide these organizations (Andrews, 2024a; Keppeler and Papenfuß, 2022).

Governments worldwide have introduced various regulatory approaches to increase female representation in executive positions. These approaches generally include fixed gender quotas, voluntary gender targets, or gender reporting requirements (Sojo et al., 2016; Terjesen et al., 2015). Debates have arisen regarding which regulatory approach—mandatory regulation (e.g. laws), self-regulation (e.g. corporate governance codes), or a combination of both—is most effective and how organizations should respond to such regulation initiatives (Aragòn-Correa et al., 2020; Klettner et al., 2016; Schrempf-Stirling and Wettstein, 2023; Terjesen et al., 2015).

A promising governance innovation for advancing gender equity is flexible gender targets (FGTs) with mandatory reporting requirements for executive levels below the executive director level. For instance, this approach has been adopted in German law (Papenfuß et al., 2024a) as well as corporate governance codes in Australia and the Netherlands. FGTs are a hybrid regulatory approach that combines elements of mandatory regulation and self-regulation. Organizations can self-determine their gender targets, which allows flexibility, while mandatory disclosure in annual statements should ensure accountability. This should promote gender representation at lower executive levels and extend the recruitment pool for female executive director positions (Fitzsimmons et al., 2014). FGT reporting requirements address pertinent public values, such as accountability (Grossi et al., 2024; Overman et al., 2015) and equity (Andrews, 2024b; Keppeler and Papenfuß, 2022)—normative principles on which MOCs’ governance and operations should be based (Jørgensen and Bozeman, 2007; Van Genugten et al., 2023).

Moreover, FGTs are an important topic in the context of social sustainability (Christensen et al., 2021; Hummel and Jobst, 2024), which is defined as “the degree to which inequalities and social discontinuity are reduced” (Argento et al., 2025). In the debate on social sustainability reporting (GRI, 2024; Kaur et al., 2025; Christensen et al., 2021), a key requirement is reporting of gender shares at corporate levels and established strategies aiming to increase female representation (European Union, 2022; Sojo et al., 2016; Terjesen et al., 2015; United Nations, 2024).

Critics argue that mandatory regulations can be “overly rigid, inefficient, or ineffective” (Aragòn-Correa et al., 2020, p. 339) and often fail to realize accountability in MOCs (Argento et al., 2019; Papenfuß and Schmidt, 2021). In the debate on optimal regulatory frameworks for addressing governance issues, researchers emphasize the complementary use of mandatory regulation and self-regulation and stress the need for further research on this topic (Aragòn-Correa et al., 2020; Kourula et al., 2019; Schrempf-Stirling and Wettstein, 2023). In the context of MOCs, public corporate governance codes (PCGCs), a self-regulation concept for political control, can help to refine governance standards and reinforce legal requirements such as mandatory FGT reporting (Expert Commission, G-PCGM, 2024; Papenfuß, 2023).

This study draws on publicness theory as a core theory of public administration and public management (Hattke and Vogel, 2023; Keppeler and Papenfuß, 2022; Andrews et al., 2011; Moulton, 2009). The paper uses publicness theory as an umbrella to address different theoretical perspectives in the publicness debate. Control publicness is central in this debate and describe the extent to which government influences an organization’s priorities (Andrews, 2022; Bozeman, 1987; Keppeler and Papenfuß, 2022). It is crucial in the publicness theory debate and for policymaking to better understand the potential effects of control publicness on public values (Bozeman and Moulton, 2011; Choi et al., 2021; Keppeler and Papenfuß, 2022; Puro et al., 2023).

As a newly introduced concept for control publicness, the study examines the effect of PCGCs on compliance with legal requirements for FGT reporting in MOCs. In light of prevailing debates in the public sector and researchers’ efforts to illuminate the effects of publicness on public value outcomes (Andrews et al., 2011; Bozeman and Bretschneider, 1994; Choi et al., 2021; Puro et al., 2023), it is highly relevant to better understand the effects of PCGCs on public values (Moulton, 2009).

Against this background, the research question of this study is as follows: To what extent do PCGCs as a concept for control publicness for MOCs affect compliance with mandatory FGT reporting?

Methodologically, this study examines mandatory FGT reporting in 673 annual reports disclosed by 113 German MOCs with at least 500 employees and subject to codetermination, covering the period from 2015 to 2020. Germany is a fruitful testing ground as it is the first country to implement flexible FGTs with mandatory reporting for executive levels by law. Moreover, the diverse landscape of municipalities with and without PCGCs as well as with varying governance standards in PCGCs provides a valuable context for this study.

The study offers the following contributions: First, it responds to calls for investigating innovative regulatory approaches (Klettner et al., 2016; Terjesen et al., 2015) by introducing FGTs with mandatory reporting as a governance innovation. It strives to initiate a theoretical discourse on this promising governance innovation in the public administration and management debate and to examine its potential to strengthen social sustainability and the attachment to public values. The study also shows the broader applicability of flexible targets with mandatory reporting to other policy fields, such as ecological sustainability.

Second, the study addresses demand in recent research on mandatory regulation and self-regulation (Aragòn-Correa et al., 2020; Schrempf-Stirling and Wettstein, 2023) by illuminating the complementary use of concrete rules or cross-references in PCGCs that supplement the law to strengthen public value outcomes, namely accountability regarding FGTs. This provides empirical support for employing a combination of mandatory regulation with laws and PCGCs in the debates on policymaking, regulation, and public values.

Third, this study introduces, theorizes and tests PCGCs as a concept for control publicness and enhances the theoretical understanding of this concept in the publicness theory debate. Addressing research needs on the effects of publicness (Andrews et al., 2011; Choi et al., 2021; Puro et al., 2023), it explores how PCGCs allow governments and public administrations to influence MOCs’ priorities regarding public values in the context of accountability regarding FGTs. However, specific rules or cross-references in PCGCs to mandatory FGT reporting requirements are crucial in this relationship.

The article is organized as follows: The next section introduces the FGTs with mandatory reporting. This is followed by an explanation of the relevance of MOCs and public corporate governance. Thereafter, the theoretical framework and hypotheses are introduced. The method section describes the data and methodology. After presenting and discussing the results, the study ends with a conclusion and outlook.

In the implementation of policies—such as sustainability policies (Aragòn-Correa et al., 2020; Christensen et al., 2021; Hummel and Jobst, 2024)—and the mitigation of governance challenges, policymakers often question whether it is preferable to enact mandatory regulation, such as laws, or self-regulation, such as corporate governance codes. Mandatory regulation, i.e. laws, are formally binding and mandatory in their application. Self-regulation is not formally binding and is flexible in its application—developed by legislators or multi-actor groups. Hybrid regulatory approaches combine elements of mandatory regulation and self-regulation (Aragòn-Correa et al., 2020; Papenfuß and Schmidt, 2021; Schrempf-Stirling and Wettstein, 2023).

Regarding the promotion of gender equity and female representation in executive positions in public- and private-sector organizations, a complex network of different regulatory approaches exists across the globe. These approaches vary in bindingness, precision, and functioning (Klettner et al., 2016; Sojo et al., 2016; Terjesen et al., 2015).

Fixed gender quotas entail legally binding percentages of gender representation and clear enforcement mechanisms (Mensi-Klarbach and Seierstad, 2020). Research on gender quotas has revealed varied organizational responses: some organizations formally comply while undermining structural change (Gibert and Fedorets, 2024), while others resist the measures due to perceived reductions in managerial flexibility or disruptions to governance structures (Gregorič et al., 2017).

Voluntary gender targets are less invasive interventions, being recommendations for minimum thresholds or self-determined targets based on an organization’s ambitions (Klettner et al., 2016). They follow a non-binding self-regulatory approach (Mensi-Klarbach et al., 2021). Critics argue that self-regulation yields problems with effectiveness in crucial areas due to a lack of bindingness and fewer sanction mechanisms. However, self-regulation can also increase effectiveness in critical corporate governance areas (Papenfuß and Schmidt, 2021) because it initiates long-term cultural changes and structural commitment to strengthening the representation of women (Klettner et al., 2016).

Gender reporting requirements entail the reporting of gender shares in executive positions in annual statements (Sojo et al., 2016). Firms may adopt gender reporting as a relevant mechanism for feedback on organizational behavior, reflecting the organization’s commitment to gender equity and progress in implementing it (Sojo et al., 2016). However, organizations may also perceive reporting as a threat (Bennedsen et al., 2022), hindering credible and detailed reporting.

At the center of the continuum between mandatory regulation and self-regulation for promoting women in executive positions are FGTs, a form of governance innovation. A governance innovation can be understood as “novel rules, regulations, and approaches that, compared to the current state of affairs, seek to address a public problem in more efficacious and effective ways, to achieve better policy outcomes, and, ultimately, to enhance legitimacy” (Anheier and Fliegauf, 2013, p. 155).

FGTs were developed to increase the share of women in executive positions by synergizing elements of common demand-side gender regulations. In Germany, FGTs have been legally implemented through the Act on Equal Participation of Men and Women in Management Positions for all listed or codetermined corporations (i.e. limited liability companies and stock corporations with at least 500 employees), which combines elements of mandatory regulation and self-regulation. Accordingly, executive directors of these corporations must mandatory self-determine FGTs for both executive levels below the executive director level (Section 76 (4) Stock Corporation Act and Section 36 Act on Limited Liability Companies). The self-determined FGTs are not binding quotas but rather a form of self-regulation. Affected MOCs have flexibility in determining the targets’ level to align with industry-specific and corporate conditions, but the law requires reporting in annual statements (Section 289f Commercial Code). This reporting must include the specified target share of women at each executive level and the deadline for attaining the target. Newly determined targets must not fall below the status quo if the share of women remains below 30%. With the update of the Act in 2021, noncompliance with the reporting obligation became punishable by up to 50,000 euros for organizations not listed in the capital market. In some countries, FGTs for executive levels have been implemented through corporate governance codes for listed corporations. For example, in Australia, the ASX Corporate Governance Principles and Recommendations (No. 1.5) and, in the Netherlands, the Dutch Corporate Governance Code (No. 2.1.5) recommend that listed corporations set FGTs for executive levels and report them in corporate governance or annual statements.

From a conceptual perspective, FGTs with mandatory reporting often address criticized shortcomings of other regulatory approaches, making them a promising governance innovation. By requiring organizations to self-determine targets while imposing standardized, binding accountability in the annual statement, FGTs have the potential to enable more sustainable and context-specific progress in gender equity. By targeting executive levels below the executive director level, FGTs strategically strengthen the pipeline through which women gain crucial operational experience and increase their chances of advancing to the executive level (Fitzsimmons et al., 2014). FGTs with mandatory reporting represent “a governance innovation with great potential for personnel development, employer attractiveness, and social sustainability” (Papenfuß et al., 2024a, p. 35).

Accountability is often defined as “a relationship between an actor and a forum, in which the actor must explain and justify his or her conduct, the forum can pose questions and pass judgment, and the actor may face consequences” (Bovens, 2007, p. 447). Mandatory FGT reporting broadens this forum, making scrutiny easier and encouraging actors to act more responsibly, knowing that their actions and decisions are visible and subject to oversight.

The annual statement is the core document for accountability of all enterprises, including MOCs (Hummel and Jobst, 2024; Expert Commission, G-PCGM, 2024; OECD, 2024a; Papenfuß and Wagner-Krechlok, 2023). In Germany, it includes a balance sheet, a profit and loss statement, a management report, and an  Appendix. Increasingly, the annual statement also serves as a key document for promoting accountability on non-financial and sustainability aspects. In the European Union, the Non-Financial Reporting Directive extends the management report by requiring a non-financial statement, and the subsequent Corporate Sustainability Reporting Directive mandates the disclosure of sustainability information in line with the European Sustainability Reporting Standards (ESRS) (Hummel and Jobst, 2024). Current regulation approaches suggest that large MOCs—defined as exceeding at least two of the following thresholds: €25 million in total assets, €50 million in revenue, or 250 employees—are planned to be required to report on environmental, social, and governance topics from the 2025 financial year, including information on equal treatment, equal opportunities, and gender distribution at the top executive level (ESRS S1). This underlines the potential to use the annual statement to foster accountability on non-financial issues and good corporate governance, such as for mandatory FGT reporting.

MOCs are enterprises under the control of local/municipal governments, either through majority ownership of one or more governments or by exercising an equivalent degree of control (OECD, 2024a; Papenfuß, 2023; Papenfuß and Keppeler, 2020). They play an important role in delivering essential services and infrastructure to society (Van Genugten et al., 2023), and are important public employers (Papenfuß, 2023; Rackwitz and Raffer, 2024). MOCs comprise a theoretically fruitful organizational context between business and the state, and they are characterized by hybridity (Bruton et al., 2015; Grossi et al., 2024) and a multiplicity of values in their governance (Grossi et al., 2015). Conceptually, they carry a special responsibility in upholding public values (Jørgensen and Bozeman, 2007), such as accountability (Grossi et al., 2024; Overman et al., 2015) and equity (Andrews, 2024b; Keppeler and Papenfuß, 2022).

Public corporate governance is the legal and factual regulatory framework for control, supervision and management of public organizations with independent economic management. Public corporate governance also includes steering, managing and supervising the behavior of public organizations with independent economic management (Papenfuß, 2023; Papenfuß and Wagner-Krechlok, 2023). Public corporate governance is not limited to a specific legal form; “corporate” specifies the focus on public organizations with independent economic management.

PCGCs are a self-regulation concept and can contribute to better corporate governance of MOCs and to the achievement of various political objectives, such as accountability, equity, and sustainability (Expert Commission, G-PCGM, 2024; Mensi-Klarbach et al., 2021; Papenfuß and Wagner-Krechlok, 2023). PCGCs prescribe governance standards, principles and regulations for the management and supervision of MOCs and should contain nationally and internationally recognized standards of responsible governance (Papenfuß, 2023; Papenfuß and Wagner-Krechlok, 2023 OECD, 2024a). They should define goals, responsibilities, duties, rights, instruments and processes for various areas. A PCGC clarifies actor roles and responsibilities, establishes working processes, mentions relevant governance instruments and approaches, and can foster the development of a good governance culture. In some countries, such as Germany, PCGCs are typically based on the comply-or-explain principle. This permits MOCs to deviate from voluntary recommendations but the disclose of a declaration of compliance is mandatory, for instance with an anchoring in the statues of the MOCs. Conceptually, in some countries, PCCGs are also a hybrid regulatory approach combining voluntary self-regulation with mandatory reporting (Papenfuß and Wagner-Krechlok, 2023).

This study draws on publicness theory to embed research on FGTs into the public administration and public management literature (Andrews, 2022; Choi et al., 2021; Puro et al., 2023). The paper uses publicness theory as an umbrella to address different theoretical perspectives in the academic debate on publicness. The normative publicness perspective defines publicness as the extent to which organizations express attachment to public values and/or provide for public values (e.g. Moulton, 2009; Bozeman, 2007). The dimensional publicness perspective, also called organizational, descriptive, or empirical publicness (Moulton, 2009; Bozeman and Moulton, 2011; Andrews, 2022), differentiates the degree of publicness of organizations based on the dimensions of control, ownership, and funding (e.g. Andrews et al., 2011). The realized publicness perspective integrates normative and dimensional elements by conceptualizing realized publicness as “public outcomes predicted in part by institutions embodying public values” (Moulton, 2009, p. 889). The publication of FGTs indicates the public value of accountability and the attachment to the public value of gender equity.

A key element in publicness theory debates is control publicness, which refers to the influence of government on an organization’s priorities (Andrews, 2022; Bozeman, 1987; Keppeler and Papenfuß, 2022). It encompasses the political authority to intervene in auditing, monitoring, and managing MOCs (Choi et al., 2021), thereby shaping organizational policies and management practices to achieve public values. An important aspect of political authority is regulative institutions on public values (Moulton, 2009), which establish legal or sublegal formal rules and monitoring and sanctioning mechanisms to ensure the outputs/outcomes of public values in organizations.

With regard to the first hypothesis, from publicness theory perspectives, PCGCs are a concept for control publicness with increasing importance for the realization of public values in the governance of MOCs (Mensi-Klarbach et al., 2021; Papenfuß and Schmidt, 2021; Papenfuß and Wagner-Krechlok, 2025). PCGCs address monitoring structures and reporting requirements, strengthening institutional pressure on MOCs to adhere to mandatory regulations. By increasing external scrutiny and aligning governance practices with expectations on public values, PCGCs foster an institutional environment in which MOCs are more likely to comply with mandatory reporting regulations. Moreover, PCGCs can include recommendations for gender-diverse boards and executive levels and an emphasis on fostering a corporate culture that promotes gender equity, tolerance, and non-discrimination (Papenfuß and Wagner-Krechlok, 2023). Moreover, mentioning political goals and public values unfold normative and regulatory pressure. Literature has shown effects of PCGCs on public value-based governance in MOCs (Mensi-Klarbach et al., 2021; Papenfuß and Schmidt, 2021).

In Germany’s federal system, each municipality has a self-governing authority to organize local government and service provision. This has resulted in a diverse landscape in which some municipalities have established PCGCs for their MOCs while others have not. According to empirical studies that emphasize the complementary use of mandatory regulation and self-regulation (Aragòn-Correa et al., 2020; Kourula et al., 2019; Papenfuß and Schmidt, 2021; Schrempf-Stirling and Wettstein, 2023), it is likely that MOCs facing higher control publicness via a PCGC have higher compliance with mandatory FGT reporting requirements. This leads to:

Regarding the second hypothesis, for PCGCs to be a more impactful concept for control publicness, the quality of the rules is important (Papenfuß and Wagner-Krechlok, 2023, 2025; Ahrend, 2024; Papenfuß and Schmidt, 2021). Precise and comprehensive phrasing provides less room for leeway among the addressed actors, directly addresses key accountability issues, and formulates more effective compliance mechanisms. Analyses of corporate governance codes for private firms worldwide (Cicon et al., 2012; Zattoni and Cuomo, 2008) and for PCGCs in Germany (Papenfuß and Wagner-Krechlok, 2023) indicate significant differences in the scope, coverage, and strictness of these rules. The heterogeneous components of PCGCs lead to significant differences in accountability effects (Papenfuß and Schmidt, 2021).

The German Public Corporate Governance-Modelcode recommends that executive directors “shall set target figures for the proportion of women in the two management levels below the management body that go beyond the current status quo” (No. 103). Furthermore (No. 5), “the supervisory body and the management body report annually […] in the management report […] an indication of whether the set target figures for the proportion of women in the two management levels below the management body have been achieved” (Expert Commission, G-PCGM, 2024).

However, in Germany, municipalities have developed varying PCGCs for their MOCs, with significant differences in rules across key governance and policy fields, including reporting requirements for FGT. Only a subset of the existing PCGCs contain a specific rule or cross-reference to the inclusion of FGT reporting in annual statements (Papenfuß and Wagner-Krechlok, 2023). A specific rule in a PCGC, such as one addressing accountability in the context of FGT reporting, signals both a clear commitment to public values and the political will to realize it. From a publicness theory perspective, such rules represent a more direct form of political control, reflecting a higher degree of control publicness, and should thus lead to better attachment to public values. It is, therefore, reasonable to assume that PCGCs with concrete rules enhance mandatory FGT reporting. This leads to:

The dataset used in this study contains a representative sample of MOCs in Germany, representing a country with mandatory FGT reporting in the annual statement and a particularly fruitful context to explore the research question. The corporate governance structure of German MOCs follows a two-tier board system, legally separating executive directors (management board) from non-executive directors (supervisory board). Executive directors, appointed by the shareholding municipal government or the supervisory board, are responsible for the MOC’s strategic direction and possess high managerial autonomy. In Germany, MOCs are “ascribed a role model function in the debate on the equal participation of women in leadership positions” However, with a share of female executive directors at 22.1%, they are “still below the goals formulated by policymakers” (Papenfuß et al., 2024b, p. 36). Below the executive director level (first executive level), the divisional heads or senior managers (second executive level) should manage broad functional areas and coordinate cross-departmental activities. The department and team leaders (third executive level) operate in specific departments or teams within the functional division. They manage daily operations and should translate strategic goals into functional activities.

The data collection was conducted in five steps. First, the 16 German capital cities/city-states as well as the four largest additional cities in each federal state were selected based on population size. Due to its status as an independent city, Bremerhaven was also included alongside Bremen. This resulted in a total of 69 cities, evenly distributed across Germany, ensuring balanced geographic representation.

Second, all MOCs with direct (first-degree) or indirect (second-degree) majority ownership (at least 50%) by these 69 cities were identified from the municipalities’ annual shareholdings reports, yielding over 2,000 MOCs.

Third, all MOCs subject to mandatory FGT reporting (see section 2) during the period from 2015 to 2020 were identified within this sample. This includes corporations in the legal form of a limited liability company (Gesellschaft mit beschränkter Haftung) or a stock corporation (Aktiengesellschaft) with at least 500 employees and subject to employee codetermination. This led to a total of 113 MOCs from 30 cities in the observation period. From 2015 to 2019, 112 MOCs, and in 2020, 113 MOCs, met the criteria, yielding to a total of 673 observations (see Table 2). The 113 MOCs are well distributed across Germany, 37.2% located in western, 23.9% in northern, 22.1% in eastern, and 16.8% in southern federal states/city-states. Among the 58 MOCs providing technical services, 27 are municipal utilities (including energy and water providers), 26 are public transport corporations, and 5 are waste disposal corporations. The 44 MOCs providing human services include 23 hospitals; 10 social service corporations; 5 culture, fairs, and events corporations; and 6 public housing corporations. Out of the 11 MOCs providing administrative services, 9 are shareholding management corporations and holdings and 2 are facility management corporations.

Fourth, for these MOCs, the annual statements and corporate governance reports were obtained from the company register (a national repository of corporation reports) and the MOCs’ websites for 2015–2020.

Fifth, all available legally mandated FGT reporting data were gathered within the collected document.

Sixth, the study collected the established PCGCs of the analyzed municipalities through an online search of their official websites. Within these PCGCs, existing rules and cross-references to the legal requirements for FGT reporting were identified. There are no regulatory requirements at the federal state level mandating the reporting of FGTs for MOCs, neither within municipal laws nor within equality laws of the federal states. A second rater reviewed all coding to ensure the consistency and reliability of the data, and a complete intercoder agreement was achieved after resolving disagreements through an exchange.

The dependent variable, “FGT reporting,” indicates the reporting of FGTs for the executive levels below the executive director level in the annual statements or corporate governance reports for each year. This study measures corporate reporting using binary coding. The variable equals one if the MOC fulfills the legal reporting requirements of German commercial law and zero otherwise. The reporting requirement is deemed fulfilled if the reporting includes the legally required components: (1) FGTs for both executive levels below the executive director level and (2) the period within which the organizations intend to attain the gender targets.

The independent variable “PCGC” is categorial. It captures the existence and FGT content of a PCGC for each municipality and its MOCs. This variable is coded as follows: zero if no PCGC exists, one if a PCGC exists but does not include a rule on FGT reporting, and two if a PCGC exists and includes a specific rule or cross-reference to the legal requirements on FGT reporting.

The study employs several control variables that could plausibly influence FGT reporting in annual statements. Regarding board controls, the study controls for women in key decision-making and supervisory positions because theoretical perspectives and empirical research have highlighted the pivotal role of women’s functions in such positions in promoting gender equity and representation in executive positions (Andrews, 2024b; Sabharwal, 2015). “Female CEO” is a binary-coded variable with a value of one if the MOC has a female chief executive officer (CEO) or a woman as a single executive director and zero otherwise. “Female chairperson” is a binary-coded variable with a value of one if a female chairperson supervises the MOC’s directors and zero otherwise. “Multi-person board” equals one if at least two executive directors head the MOC and zero otherwise. The number of executive directors in German MOCs vary depending on factors such as organizational size, complexity, and public service industry affiliation, but most often ranges from one to three (Papenfuß, 2023). In this sample of large MOCs, 23.0% of the MOCs are managed by a single executive director, while in the remaining MOCs, the board consists of two or more executive directors. The number of executive directors may influence the effectiveness of corporate reporting, since a higher number of executive directors could increase internal oversight, fostering mutual control and improving accountability, which may strengthen compliance with FGT reporting requirements. Due to the strong correlation with firm size variables, the study uses a dummy variable to represent the number of executive directors.

Regarding firm controls, “Non-market producing MOC” draws on the binary classification of the German Federal Statistical Office. It equals one if the degree of self-financing (i.e. the ratio of sales to production costs) is at most 50% and zero otherwise. An exception is made for so-called government auxiliary corporations, in which the degree of self-financing is at least 50% but generates more than 80% of their sales from government entities. These auxiliary enterprises are also counted as non-market producers (German Federal Statistical Office, 2024). Market-producing MOCs receive less funding from the government and tend to follow a more profit-oriented market logic, which may sideline concerns about non-compliance with legal requirements concerning public values in MOCs. “Municipal ownership shares” represents the percentage share of the largest shareholding municipality, and “Indirect shareholding” is a binary-coded variable equal to one if the municipality indirectly holds the MOC shares and zero otherwise. Higher and more direct public involvement may increase the likelihood of accountability due to more public monitoring. The study integrates firm size measured by the natural logarithm of the “Number of employees.” Firm size is a frequent proxy for external visibility, which could positively affect the need for accountability. Further, the study includes a categorical variable for “Public service industries,” differentiating the main public services provided by each MOC: technical, human, or administrative (for a comparable approach, see Andrews, 2022; Andrews, 2024b; Papenfuß and Schmidt, 2022). This categorization is made regarding their corporate objectives. This three-category classification is particularly suitable for the research goal of this study as it captures the decisive differences in the representation of women in the public sector within this sample, which may influence FGT reporting. Additionally, it avoids classification challenges for MOCs that provide multiple services or hold subsidiaries in different industries (e.g. municipal utilities that combine energy and transport services) and maintains sufficient cluster sizes for robust statistical analyses. Finally, the study employs year dummies to control for year effects.

The data used in this study include unbalanced panels with repeated observations of MOCs’ FGT reporting over six years. Using panel data has advantages, such as controlling for unobserved heterogeneity, improving statistical estimates due to the larger sample size, and capturing average effects for observed units and dynamic effects for the entire sample. However, group- and time-specific effects may distort the estimation. To address this issue, the study applies random-effects models. Random-effects models are used since fixed-effects estimation requires significant within-panel variation, but some independent and control variables are stable over time. The Hausman test additionally demonstrates the preferability of random-effects against fixed-effects modeling (χ² = 3.18, p = 0.922). Robust standard errors were applied in the models to enhance the reliability of the estimates by addressing potential heteroskedasticity and autocorrelation. Since the dependent variable is dichotomous, the study employs random-effects logistic regression models using the xtlogit command in Stata 18.

Table 1 provides a summary of the descriptive statistics for the panel data, including the mean, minimum (Min), maximum (Max), and standard deviation (SD). Additionally, the table contains the regression model’s variance inflation factors (VIFs).

On average, only 59.7% of the analyzed MOCs disclose FGTs for the executive levels, meaning that 40.3% do not meet mandatory FGT reporting requirements over the study period. FGT reporting evolved from 46.4% in 2015 to 62.8% in 2020, with a decrease from 2019 to 2020 (see Table 2). Of the 30 municipalities examined, 18 enacted a PCGC, meaning that 69.5% of the MOCs are subject to a PCGC. Among these MOCs, 8.0% are subject to a specific rule in the PCGC that recommends FGT reporting in addition to the mandatory FGT reporting. According to the pairwise correlation matrix (see  Appendix/Table A1), all coefficients are below 0.7, and the VIFs (see Table 1) are well below the usual cut-off of 10 with a maximum value of 1.87, signaling no concerns of multicollinearity.

Table 3 presents the results of the random-effects logistic regression. The model assumptions are met, and the estimation results are stable across the models. The baseline model (Model 1) reports the effects of the control variables, and Model 2 reports the main effects of the PCGCs and their FGT reporting rules or cross-references on FGT reporting.

The results in Model 2, with the other variables controlled, indicate that a PCGC without specific FGT reporting rules does not significantly influence FGT reporting (β = −0.678, p = 0.60). In contrast, PCGCs that include specific FGT reporting rules significantly and positively affect the likelihood of FGT reporting (β = 3.516, p < 0.05). Specifically, PCGCs with an FGT reporting rule increase the odds of FGT reporting by 33.65 compared to the absence of a PCGC. The odds ratio is calculated by exponentiating the logistic regression coefficient (e^β). In this example, with β = 3.516, applying the formula odds ratio = e^β results in an odds ratio of 33.65.

Regarding significant control variables, MOCs with a female CEO (β = −1.309, p < 0.1), with a higher share of municipal ownership (β = −0.095, p < 0.01), and in human services (β = −5.261, p < 0.01) are associated with a lower likelihood of FGT reporting. In contrast, MOCs with a multi-person board (β = −2.404, p < 0.05) are associated with a higher likelihood of FGT reporting.

Overall, compared to the situation prior to the introduction of this governance innovation, accountability on FGTs substantially improved, representing an important step forward in the discourse on accountability and social sustainability (Papenfuß and Wagner-Krechlok, 2025; Hummel and Jobst, 2024). However, despite mandatory regulation by law, stressed public values, and their role model function, MOCs’ adoption of FGTs does not meet policymakers’ expectations. From publicness theory perspectives, the findings imply a lack of attachment to public values and a lack of realization of public values in this context (Moulton, 2009; Keppeler and Papenfuß, 2022). The combined regulation with self-determined targets and mandatory reporting holds high potential and could be applied to various other policy fields and sustainability debates. However, its effectiveness remains limited if compliance with mandatory elements is not adequately ensured. The descriptive findings on FGT reporting, along with the only marginal increase in adoption over the years highlight a severe need for policymakers and practitioners to enhance accountability in this field. Future research should explore the underlying reasons and mechanisms behind this insufficient compliance and weak attachment to public values, as well as identifying approaches that could substantially strengthen accountability and public values.

First, the results do not provide statistical evidence to support Hypothesis 1. MOCs subject to PCGCs are not more likely to comply with FGT reporting. The mere presence of a PCGC does not ensure higher accountability on FGT, likely due to variations in PCGC content across municipalities. The effectiveness of PCGCs may depend on the specific rules in terms of some policy goals and dependent variables. Symbolic adoption of PCGCs without substantive implementation may be a further explanation (Papenfuß and Wagner-Krechlok, 2023). This highlights the need for a nuanced understanding of the design of PCGCs, distinguishing between fields in PCGCs that require specific rules and those where broader recommendations suffice.

Second, the results support Hypothesis 2, which posits a higher likelihood of compliance with mandatory FGT reporting when the MOC is subjected to a PCGC with a specific rule or cross-reference on FGT reporting. PCGCs of good quality appear to be a helpful concept for control publicness that allows governments and public administrations to shape MOCs’ priorities in relation to the attachment to public values and public value outcomes (Papenfuß and Wagner-Krechlok, 2023, 2025; Papenfuß and Schmidt, 2021; Moulton, 2009).

This study provides empirical arguments for the complementary use of mandatory regulation and self-regulation to foster accountability in the discourse on social sustainability and sustainability reporting (Hummel and Jobst, 2024; Argento et al., 2019; Christensen et al., 2021). In particular, the findings have implications for the current debate on social sustainability and sustainability reporting (Argento et al., 2025; Kaur et al., 2025; Papenfuß and Wagner-Krechlok, 2025; Hummel and Jobst, 2024).

To enhance political control, accountability, and compliance with legal requirements, the findings call for policymakers and public owners to establish precise rules in PCGCs and cross-reference important paragraphs of new laws in some crucial fields and critical public corporate governance areas (Papenfuß and Schmidt, 2021; Papenfuß, 2023; Papenfuß and Wagner-Krechlok, 2023). Future research could investigate the effects of the party affiliation and personal characteristics of both the mayor and the board chair as potential factors for control publicness, including the interaction of these actors and their potentially diverging effects across different contexts and board systems. While in certain contexts the board chair might be a decisive person, in others the mayor might be the more influential actor. The role of these actors may vary depending on the specific contextual and institutional settings. Additionally, future research would benefit from extending assessments to smaller MOCs and those with public legal forms.

Although the study provides novel and relevant theoretical and empirical contributions and anchor points for future research, it has limitations. First, the study focuses on the organizational context of MOCs, but FGTs with mandatory reporting are also relevant to government-owned enterprises from other federal levels and the private sector. However, with the high corporatization of public services at the municipal level, the MOC context is particularly insightful for enhancing the theoretical understanding in publicness theory debates, and it provides a fruitful testing ground. Second, the study examines large MOCs with mandatory reporting requirements and the complementary effects of PCGCs with laws. For future research, analysis of the spillover effects of this governance innovation toward voluntary FGT reporting by smaller MOCs would be insightful in the debate on fostering the public values of accountability and equity. Third, questions remain about how the study results can be generalized to other policy fields and countries. It remains to be seen whether further countries will adopt FGTs and how labor market conditions and administrative traditions might affect organizations’ responses.

Based on a panel comprising 673 observations of FGT reporting in annual statements that large German MOCs disclosed between 2015 and 2020, this study shows that MOCs’ reporting of FGTs has increased accountability, however in an overall view, the adoption does not meet policymakers’ expectations. PCGCs with a specific rule or cross-reference to legal FGT requirements enhance accountability regarding FGTs.

This study broadens the understanding of alternative regulation approaches by introducing FGTs with mandatory reporting as a governance innovation that has already been established in first single countries but should be considered for broader adoption around the world. It strives to initiate a theoretical discourse on the determinants and effects of this promising governance innovation. PCGCs represent a relevant concept for control publicness and serve as potential levers for enhancing public value outcomes.

FGTs with mandatory reporting represent a promising contribution to the future scientific debate on accountability and equity in all forms of public sector organizations. Policymakers could integrate self-determined targets with mandatory reporting into other policy fields, and researchers could theoretically explore and evaluate them.

Addressing sustainability issues through self-determined targets with mandatory reporting by simultaneously providing effective regulatory mechanisms with synergies between self-regulation and mandatory regulation is a crucial and rewarding future topic in science and policymaking. This is especially promising in the debate on solving grand challenges and fostering ecological and social sustainability.

This paper forms part of a special section “Governance and accountability (Gover-nability) of multiple values of municipal corporations”, guest edited by Dr. Daniela Argento, Dr. Giuseppe Grossi, Assoc. Prof. Marieke van Genugten and Assoc. Prof. Anna Thomasson.