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Such an outcome contradicts not only the results of the other studies in this area, but also the answers to some other questions in our survey. For example, only two enterprises reported that they were not interested in housing divestiture. This means that the others who insisted on preserving all social functions expressed their intentions in an internally inconsistent way. It seems this phenomena has a psychological explanation and corresponds to traditional paternalistic attitude of Soviet enterprise managers towards working collectives. Even if in reality managers take some actions to divest social assets, they do not consider it appropriate to admit that they are going to leave their workers without some form of social support from the enterprise. This outcome is consistent with the results of the large World Bank enterprise survey where more than half of the managers of responding firms explained their continuation social benefits provision by non-economic factors (Commander and Lee, 1995). Certain objective reasons are definitely behind such social and ethical preferences of enterprise managers. The necessity to preserve good relations with local and regional authorities seems to play the key role here. Thus as managers have quite internally inconsistent feelings about divestiture, it is not surprising that their practical steps towards transferring social assets would not be very consistent and active, and they could be easily blocked by local authorities.

# **3. POSSIBLE WAYS OF SOCIAL ASSETS RESTRUCTURING**

Options available. There are three possible solutions to the problem of enterprise social assets. Enterprise social assets can: (i) be kept by enterprises with or without changes in principles of their utilization, financing and ownership; (ii) be transferred to municipalities for further privatization of ownership and management; (iii) be handed over to municipalities to be kept under municipal ownership and management.

A significant portion of the overall social assets has been included in the founding capital of the former state enterprises and privatized along with the rest of the company (productive assets). Insiders consider (or at least used to)<sup>9</sup> such privatization deals as beneficial for themselves because they saw profitable opportunities of either using or selling the associated real estate. Insiders voluntarily undertook the responsibility for maintaining these assets. There was no reason, therefore, for the government to consider plans of their divestiture or continue subsidization of their maintenance, including implicit subsidization through tax benefits. Among social assets which have been most frequently included in the founding capital of privatized firms are sport, recreation, and entertainment facilities. The costs of their operation might amount up to 25 % of the current total costs of maintaining enterprise social assets. (See Annex 4).

According to the survey, enterprises consider various ways to use social assets at their disposal, including downsizing certain activities and making them self-financing. Among the methods to increase cost recovery, the most popular has been to attract new clients from non-employees and to increase user fees for them. The possibilities to increase fees from the enterprise employees and to reprofile and commercially use some social assets are also considered, though less frequently.

> 9 Sometimes when the owners change their mind. they manage to make a deal with the local administration and to sell these social assets to the city at symbolic prices; but in other cases they have to suffer from the results of their previous decisions regarding privatization, which have proven unprofitable.