Public Corporations: Features, Merits and Demerits

Public Corporations

A public corporation is a business entity established, owned, managed, and funded by a country’s government using taxpayers’ money. Unlike private enterprises, their primary objective isn’t profit-making but rather providing crucial services to the public.

Features of a Public Corporation

1. Ownership and Financing: A public corporation is funded and owned using taxpayers’ money, making it a government-owned entity.
2. Essential Service Provision: It focuses on providing vital services essential for the public’s welfare.
3. Non-Profit Motive: Unlike typical businesses, profit isn’t the primary goal for their existence.
4. Monopoly: It often operates within a monopolistic environment due to its government-backed status.
5. Service Restrictions: Services provided by public corporations might be restricted or regulated.
6. Establishment by Legislation: A public corporation is typically established through an act of parliament or legislative decree.
7. Government Ownership, Board Management: It is owned by the government and managed by a board of directors appointed by the government.
8. Substantial Capital Requirement: A public corporation involves significant capital investment for its establishment and operation.

Reasons for Government Ownership of Public Corporations

1. Capital Involvement: Government ownership allows for substantial investment of public funds into vital sectors, which might otherwise lack sufficient private investment.
2. Prevention of Exploitation: Government ownership helps prevent exploitation of essential services or resources by private entities solely focused on profit.
3. Avoiding Duplication: Centralizing ownership prevents redundant infrastructure or service duplication, ensuring efficiency and cost-effectiveness.
4. Security Reasons: Some sectors critical for national security, like defense or key infrastructure, are better managed and secured under government control.
5. Ensuring Constant Supply: By overseeing certain industries or services, governments can ensure a consistent supply to meet public needs, such as utilities.
6. Nature of Services: Sectors like healthcare, education, and utilities are crucial for societal well-being, making government oversight essential.
7. Preventing Private Monopoly: Government ownership helps prevent private entities from monopolizing essential services and ensures fair access for all.
8. Employment Opportunities: Public corporations often serve as significant employers. They offer job opportunities and stability for citizens.
9. Rapid Economic Development: By strategically investing in key sectors, governments can drive economic growth and development more rapidly.
10. Raising Standards of Living: Providing essential services through public corporations contributes to raising the quality of life for the population.
11. Avoiding Foreign Control: Government ownership prevents excessive foreign influence or control over critical sectors. This safeguards the economy’s autonomy.

Merits of Public Corporations

1. Legal Entities: Public corporations are legally established entities which provide a structured framework for their operations and accountability.
2. Capital Assurance: Government backing ensures sufficient capitalization that enables public corporations to undertake large-scale projects that might be unattainable for private entities.
3. Monopoly Enjoyment: Operating within a regulated monopolistic environment allows public corporations to have streamlined operations and effective service provision.
4. Prevention of Exploitation: Public corporations prevent the exploitation of essential services, ensuring fair access for all citizens.
5. Avoidance of Duplication: Centralized ownership prevents redundant infrastructure or service duplication.
6. Continuity Assurance: Their government affiliation ensures a higher level of continuity and stability. This reduces the risk of sudden closures or disruptions.
7. Efficient Service Provision: Public corporations strive for efficient service delivery, often prioritizing the public’s needs over profit motives.
8. Public Accountability: Being accountable to the public, they are subject to scrutiny, ensuring transparency and responsiveness to citizens’ needs.
9. Worker Welfare: Public corporations often prioritize the welfare of their employees, offering job security, benefits, and fair treatment.
10. Employment Opportunities: They serve as significant employers, contributing to job creation and stability within the economy.
11. Economies of Scale: Public corporations benefit from economies of scale, allowing for cost advantages in large-scale production or service provision.

Demerits of Public Corporations

1. Government Interference: Government involvement can lead to excessive interference. This can affect the operational autonomy and efficiency of public corporation in the discharge of its duties.
2. Establishment Challenges: Public corporations face complex bureaucratic procedures and regulations that make their establishment arduous and time-consuming.
3. Capital Requirements: They often require substantial capital investment, which might strain government resources or lead to budget constraints.
4. Lack of Privacy: Being government-owned, they might lack the confidentiality and privacy levels typical of private enterprises which might affect certain operations.
5. Lack of Flexibility: Government regulations and procedures can limit adaptability and quick decision-making, thereby hindering responsiveness to market changes.
6. Bureaucracy: The inherent bureaucratic nature of government institutions can slow down processes and hinder innovation and agility.
7. Policy and Decision Delays: Due to multiple layers of approval and bureaucratic red tape, decision-making and policy implementation can be sluggish.
8. Worker Attitude: Some employees may lack motivation or a sense of urgency due to the perception of job security.
9. Over-production and Wastage: In some cases, public corporations might overproduce or waste resources due to bureaucratic inefficiencies or mismanagement.
10. Inefficiency: Despite good intentions, bureaucratic hurdles and lack of market competition can lead to inefficiencies in operations and resource utilization.

Problems Faced by Public Corporations

1. Government Interference: Public corporations often encounter frequent interference from the government or political entities, impacting their autonomy and operational efficiency.
2. Favouritism in Appointments: Sometimes, appointments within these corporations are influenced by favouritism rather than merit. This eventually tells on the competence of officials.
3. Embezzlement Propensity: High levels of corruption or embezzlement among officers can drain resources and undermine the corporation’s effectiveness.
4. Staffing Shortages: Inadequate personnel can strain operations and affect service delivery.
5. Political Victimisation: Officials may face unfair treatment or victimization due to political affiliations. This may affect their morale and hinder their performance.
6. Irregular Change of Officials: Frequent changes in leadership or officials can disrupt continuity and hinder long-term planning and stability.
7. Worker Apathy: Lackluster attitudes among workers, stemming from various reasons, can impact productivity and service quality.

Advantages of Government Ownership in Public Corporations

1. Steady Essential Services: Government ownership ensures a consistent and reliable supply of essential services to the public without being driven solely by profit motives.
2. Non-Profit Motive: The focus on public welfare over profit ensures that vital services are accessible to all, regardless of financial capacity.
3. Monopolistic Control: Granting monopolistic control to these corporations helps streamline operations, avoiding market fragmentation and ensuring efficient service provision.
4. Preventing Exploitation and Discrimination: Public ownership helps prevent exploitation and discrimination in the delivery of essential services.
5. Increased Employment Opportunities: Government-owned corporations often serve as significant employers, contributing to job creation and stability in the economy.
6. Government Control over Strategic Industries: It offers the government the ability to control and guide key strategic industries crucial for national development and security.
7. Uniform Service Provision: Government ownership mandates standardized services, ensuring uniformity and equitable access across regions or demographics.
8. Facilitating Economic Development: Encouraging the establishment of industries focused on economic development, irrespective of immediate profitability, helps stimulate economic growth and infrastructure development.

Disadvantages of Government Ownership in Public Corporations

1. Reduced Effectiveness: Government ownership can lead to slower decision-making processes, hindering the effectiveness and agility of these corporations.
2. Inefficiency Due to Monopoly: Monopolistic control might lead to inefficiencies and reduce incentives for innovation and improvement in service delivery.
3. Frequent Changes in Leadership: Regular changes in officials or leadership disrupt continuity and long-term planning within these corporations.
4. Perception of Nobody’s Property: Officials might perceive these corporations as belonging to nobody, and consequently, lose their sense of accountability and commitment.
5. Inefficiency and Oversizing: Some government-owned corporations can become inefficient and unwieldy due to their oversized structure which makes them difficult to manage effectively.
6. Political Appointment Bias: Appointments based on political affiliations rather than economic merit can lead to less competent officials managing these corporations.
7. Wastage of Resources: Inefficiencies and mismanagement within government-owned corporations often result in the wastage of valuable resources.
8. Bureaucracy and Red Tape: Excessive bureaucracy and red-tape hinder agility and innovation, slowing down progress and decision-making.
9. Lack of Business Acumen: Controlled by civil servants rather than business-minded individuals, these corporations might lack the necessary entrepreneurial skills for efficient operation.
10. Impact on Private Sector Development: Government ownership can hinder the growth of the private sector by creating an environment that competes with or discourages private enterprise.
11. Consumer Choice Restrictions: Monopolistic control by public corporations may limit consumer choice and reduce traditional freedoms of choice and selection.