PUBLIC CORPORATION. Definition of public corporation: Public corporation, also known as public enterprise or statutory corporation, may be defined as a large scale business organization set up, owned and financed by the government of a country mainly to provide services to the members of the public.
who controls public corporation
They are directly under the control of the government to cater for the welfare of the people.
Public corporations are run by the government through the tax paid by the people. They are established by an act of parliament or decree. The public corporation is controlled by board of directors, appointed by the government.
main purpose for setting up public corporation
They are not set up to make profit but to provide special services to the public.
Examples of public corporations in Nigeria are:
- Nigerian Ports Authority (N.P. A.)
- Nigerian Railway Corporation (N.R.C.)
- Power Holding Company of Nigeria (P.H.C.N)
- Federal Radio Corporation of Nigeria (F.R.C.N.)
- Nigerian National Petroleum Corporation! (N.N.P.C.)
- Nigerian Communications Commission (NCC)
FEATURES OR CHARACTERISTIC OF PUBLIC CORPORATION
- Ownership: Public corporations owned and financed by the government
- Establishment: Public corporations established either by decree or act of parliament.
- Objective: They are established purposely to provide essential service the generality of the people.
- Legal entity: It is a legal entity as it can sue and be sued in its own right.
- Management: Public corporations managed by board of directors who are appointed by government.
- Not profit oriented: Public corporations are not set up to make profit but to provide goods and services to the people
- Monopolistic in nature: Some corporations are conferred with monopoly power by an act of parliament or decree.
- Government and tax payers bear the risks: The risks of the business are borne by the government and the tax payers, who have provided the capital for financing the business.
- High capital requirement: A corporation requires large capital to set up, which cannot be provided by private individuals.
- Employees are public servants: Worker in public corporations are public servants and are treated as such
- Accountability: The management of public corporations (board of directors) are accountable to the government that set up the corporation.
- Restriction of services: It is true that public corporations provide services but each one is restricted to the provision of special services, e.g. P.H.C.N provides electricity while NITEL is involved in communication.
ADVANTAGES OF PUBLIC CORPORATIONS
- Provision of infrastructural facilities: Public corporations provide infrastructural facilities, such as roads, schools, railway, electricity, to the populace.
- Availability of large capital: Since public enterprises are owned by government, there is always availability of sufficient capital to ensure expansion of the enterprises.
- There is continuity: Public corporations can last for a long period of time. In other words, there is perpetual existence.
- Development of capital projects: Establishment of public corporations can ensure the development of capital projects, e.g. rural electrification.
- Avoidance of exploitation of consumers: Public corporations are consumer – conscious as they ensure that the exploitation of consumers is greatly reduced.
- Creation of higher standards: The government enters into business in order to ensure higher standards, e.g. provision of educational facilities.
- Accountability to the public: Public enterprises are accountable to the public because they have to submit their annual reports to the parliament.
- Legal entity: A public corporation is a legal entity, it can sue and be sued on its own.
- It caters for the interest of workers: In public enterprises, the interest of the workers is catered for and the employees have a great sense of security.
- Provision of employment opportunities: Public corporations provide employment opportunities for the teeming number of the unemployed.
- Enjoyment of large scale production: As a result of the availability of large capital for expansion, production can be enhanced and increased.
- Generation of revenue: Revenue is generated by the government from public corporations, e.g. water rate or electricity bill, to finance other projects.
DISADVANTAGES OF PUBLIC CORPORATIONS
- Requires large capital: The cost of establishing a public corporation is very high, i.e. large capital is involved.
- Government interference: Government can interfere in the activities of public enterprises through the appointment of unqualified and incompetent people as board members.
- Inefficiency in operation: Lack of competition can bring about inefficiency in business operation.
- Danger of monopoly: Public corporations are monopolistic in nature, e.g P.H.C.N, hence it can abuse the privilege.
- Bureaucratic tendencies and red tapism: Decision making may be slow because it has to pass through many people or channels before approval.
- Corruption and mismanagement: May public enterprises in Nigeria have become the major areas fro embezzlement and mismanagement of the nation’s resources.
- Not profitable: Most public enterprises are run at a loss because they are too large and complex to manage.
- Wastage: In public enterprises, waste are not usually discouraged because the belief is that the losses are borne by the tax payer
- Lack of initiative: Lack of initiative is always exhibited in public enterprises as government functionaries must endorse the programmes and policies of the establishment.
- Lack of privacy: Since the annual report must be presented to the public, such corporations have no privacy of their own.
REASONS FOR THE ESTABLISHMENT OF PUBLIC CORPORATIONS OR
REASONS FOR GOVERNMENT PARTICIPATION OR OWNERSHIP OF BUSINESS ENTERPRISES
High capital requirement: Public corporations usually require heavy capital outlay, which may not be affordable by private enterprises.
Generation of revenue: Public corporations help the government to generate revenue needed to finance other government projects.
To prevent foreign dominance of the economy: Government can venture into some enterprises in order to prevent or reduce foreign control of the economy by foreign investors.
To avoid wasteful competition and duplication: Public corporations are established to avoid wasteful duplication of capital resources.
To provide infrastructural facilities: Government establishes certain enterprises to provide infrastructural facilities like roads and railways on which returns may not be forthcoming and a may, therefore, not attract investment by the private sector.
To prevent monopolistic tendencies: Public corporations are set up to prevent monopolistic tendencies resulting in very high prices or charges if undertaken: private enterprises.
To ensure even distribution income: Government engages in some enterprises in order to ensure fair and ( distribution so that income would not be concentrated in a few hands.
Provision of essential service: Government engages itself in economy activities in order to provide essential services at subsidised rate, e.g. water and electricity.
To ensure higher standard of services provided: Government can participate in enterprises to ensure higher standard services provided, such as education which requires very expensive facilities that may not be affordable to the private sector.
For strategic and security reasons: Government may engage in business to control certain key industries such as airports, seaports, defense, the oil industry in which the government cannot afford competition for strategic reasons.
Employment opportunities: Government may embark on business in order to create employment opportunities for the people
To promote economic development: Government also invests in some irises, e.g. banking and insurance in order to have firm control over the economy and regulate it for developmental purposes.