Public Corporations | Advantages And Disadvantages

Hello, welcome to this class on public corporations.

Table of Contents

1. Meaning of public corporation
2. Examples of public corporation
3. Characteristics of public corporation
4. Advantages of public corporations
5. Disadvantages of public corporations.

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Meaning Of Public Corporation

Definition: Public corporation also known as public Enterprise or statutory corporation, may be defined as a large scale business organization set up, owned and finance by the government of a country mainly to provide services to the members of the public. They are directly under the control of the government to Carter 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. They are not set up to make profit but to provide special services to the public.

Examples of public corporation in Nigeria includes:

1. Nigeria Port Authority (N.P.A).
2. Nigerian RailWay Corporation (N.R.C).
3. National Electric Power Authority.
4. N.E.P.A now knows as Power Holding Company of Nigeria P.H.C.N.
5. Federal Radio Corporation of Nigeria (F.R.C.N).
6. Nigerian National Petroleum Corporation (N.N.P.C).
7. Nigeria Telecommunications Limited ( NITEL).

Features or Characteristics of Public Corporation

1. Ownership: Public corporations are owned and financed by the government.
2. Establishment: Public corporations are established either by decree or act of Parliament.
3. Objective: They are established purposely to provide essential services to the generality of the people.
4. Legal Entity: This is another characteristics of public corporation. It is a legal entity as it can Sue and be sued in its own rights.
5. Management: Public corporation are managed by board of directors who are appointed by government.
6. Not profit oriented: Public corporations are not set up to make profit but to provide goods and services to the people.
7. Monopolistic in nature: Some corporations are conferred with Monopoly Power by an act of Parliament or decree.
8. Government and tax payers bear the risk: The risk of the business are borne by the government and the tax payers, who have provided the capital for financing the business.
9. High capital requirements: High capital requirement is another characteristics of public corporation. A public corporation requires large capital to set up, which cannot be provided by private individuals.
10. Employees are public servants: Workers in public corporations are public servants and are treated as such.
11. Accountability: The management of public corporations (board of directors) are accountable to the government that set up The corporation.
12. Restrictions of services: It is true that public corporations provide services but each one is restricted to the provision of special services, e.g. N.E.P.A. (now PHCN) provides electricity while NITEL is involved in communication.

Advantages and Disadvantages of Public Corporations

Advantages of Public Corporation

1. Provision of infrastructural facilities: Public operations provide infrastructural facilities, such as roads, schools, railway, electricity to the populace or to the public.
2. Availability of large capital: Since public enterprises are owned by government, there is always Availability of sufficient capital to ensure expansion of the enterprises
3. There is continuity: Public enterprises can last for a long period of time. In order words, there is perpetual existence.
4. Development of capital projects: Establishment of public Enterprises can ensure the development of capital projects, e.g, rural electrification
5. Avoidance of exploitation of consumers: Public corporations are consumer – conscious as they ensure that their exploitation of consumers is greatly reduced.
6. Creation of higher standards: The government enters into business in order to ensure higher standards, e.g, provisions of educational facilities.
7. Accountability to the public: This is another advantages of public corporations. Public enterprises are accountable to the public because they have to submit their annual reports to the Parliament.
8. Legal entity: A public Enterprise is a legal entity, it can Sue and be sued on its own.
9. It carters for the interest of the people: In public enterprises, the interest of the workers is catered for and the employees have a great sense of security.
10. Provision of employment opportunities: Public corporations provide employment opportunities for the teeming number of the unemployed.
11. Enjoyment of large-scape production: As a result of availability of large capital for expansion, production can be enhanced and increased.
12. Generation of revenue: Another advantages of public corporations is the generation of revenue. Revenue is generated by the government from public corporation, e.g, water rate or electricity bill, to finance other projects.

Disadvantages of Public Corporations

1. Requires large capital: The cost of establishing a public corporation is very high, e.g, large capital is involved.
2. Government interference: This is another disadvantages of public corporations because government can interfere in the activities of public enterprises through the appointment of unqualified and incompetent people as board members.
3. Inefficiency in operation: lack of competition can bring about inefficiency in business operation.
4. Danger of Monopoly: Danger of Monopoly is another disadvantages of public corporations, public Enterprise are monopolistic in nature, e.g, N.E.P.A (now PHCN), Hence it can abuse the privilege.
5. Bureaucratic tendencies and red tapism: Decision-making may be slow because it has to pass through many people or channels before approving.
6. Corruption and mismanagement: Many public enterprises in Nigeria have become the major areas for embezzlement and mismanagement of the nation’s resources.
7. Not profitable: Most public enterprises are run at a loss because they are too large and complex to manage.
8. Wastage: In public enterprises, wastages are not usually discouraged because the belief is that the losses are borne by the tax payers.
9. Lack of initiative: Lack of initiative is always exhibited in public enterprises as government functionaries must endorse the programmes and policies of the establishment.
10. Lack of privacy: Since the annual reports must be presented to the public, some corporations have no privacy of their own.

Quick Revision Questions for Students

1. What is public corporation?
2. List five characteristics of public corporation.
3. Outline five advantages of public corporation.
4. And five disadvantages of public corporation.