Public Corporations One: Structure, Functions and Key Features

31

Lesson Objectives

By the end of the lesson, students should be able to:

1. Define a public corporation.
2. Identify the major features of public corporations.
3. Explain the advantages and disadvantages of public corporations.

What are Public Corporations?

Public Corporations are business organisations that are owned, financed, and controlled by the government, usually established through an Act of Parliament or decree. They are created to provide essential goods and services that may not be efficiently handled by private businesses, such as electricity, water supply, transportation, and postal services.

Unlike private companies that focus mainly on profit, public corporations are established primarily to serve the public interest, promote economic development, and ensure that vital services are accessible and affordable to all citizens. Examples include the Nigerian National Petroleum Corporation (NNPC) and the Nigerian Ports Authority (NPA).

Features of Public Corporations

• Established by an Act of Parliament: Public corporations are created through a law passed by the government (an Act of Parliament or decree). This law clearly states the purpose, powers, structure, and duties of the corporation. For example, the Nigerian National Petroleum Corporation (NNPC) was established by law to manage the oil and gas sector. This ensures the corporation has legal backing and cannot easily be dissolved without another law.

• Owned and Financed by the Government: The government provides the capital needed to set up public corporations because most of them require huge investments that private individuals may not be able to afford. Since taxpayers’ money is often used, the corporations are technically owned by the public, with the government holding ownership on their behalf. For instance, the Nigerian Railway Corporation is fully owned and funded by the government.
• Managed by a Board of Directors or Governing Council: A board or governing council, usually appointed by the government, manages public corporations. This body is responsible for decision-making and ensuring the organisation runs according to the objectives stated in the establishing law. The board members are often political appointees, and this can sometimes lead to inefficiency due to favouritism or lack of expertise.
• Provide Essential Services: Public corporations are usually established to provide essential services such as water supply, electricity, transport, and communication, which are crucial for the well-being of citizens and the smooth running of the economy. Since private investors may avoid these services if they are not highly profitable, government corporations step in to ensure everyone has access.

• Not Mainly for Profit, but for Service: Unlike private businesses, public corporations are not primarily set up to make profits but to provide affordable services to the people. While they may generate some revenue, their main goal is social welfare and national development rather than maximising profits for shareholders.
• Large Capital Requirement: Public corporations often require large amounts of money to be established and maintained. Projects like building railways, electricity grids, or ports need heavy investment, which only the government can usually provide. This is why public corporations are often found in capital-intensive industries.

• Monopolistic in Nature: Many public corporations operate as monopolies, meaning they are the only providers of certain goods or services within a country. This monopoly allows them to control prices and ensure equal access across regions. For example, in many countries, electricity supply is handled by one government corporation. However, monopoly may also lead to inefficiency.
• Employees are Public Servants: The staff of public corporations are considered government workers or public servants. They often enjoy job security, fixed salaries, and pensions. However, since their pay is not directly tied to profits, some employees may lack the motivation to be efficient compared to private sector workers.

Advantages of Public Corporations

• Provide Essential Services at Affordable Rates: Public corporations are usually established to provide basic services such as electricity, water supply, transportation, and communication, which are very important for daily living. Private businesses may not be interested in providing these services because they often require huge capital investment and may not be immediately profitable. Since public corporations are owned by the government, they can operate at a lower cost and charge affordable prices, ensuring that even poor citizens can access these vital services.
• Help in Controlling Monopolies: In many cases, private businesses may try to dominate certain industries and exploit consumers by charging very high prices. Public corporations are created to break such monopolies or to operate as state-controlled monopolies that put the interest of citizens first. For example, a government-owned electricity company prevents private firms from overcharging citizens for power supply. This ensures fairness and prevents exploitation in strategic sectors of the economy.
• Ensure Development of Strategic Industries: Some industries, like oil, gas, rail transport, and defense, are considered too important to be left in the hands of private individuals. Public corporations make it possible for the government to maintain control of these industries for national security and economic stability. This also ensures that the revenue generated from such industries benefits the whole country rather than only a few private investors.
• Generate Employment Opportunities: Public corporations usually employ a large number of people to manage their operations across different parts of the country. By doing so, they help reduce the problem of unemployment. For example, organisations like the Nigerian Ports Authority and the Nigerian Railway Corporation provide thousands of jobs directly and indirectly. This contributes to economic growth and improves the standard of living of citizens who are gainfully employed.

• Large-scale Projects can be Handled: Many projects, such as building railways, airports, power stations, and dams, require massive capital investment and long periods before profit is made. Private investors often avoid such projects because of the high cost and risks involved. Public corporations, backed by government funding, are able to carry out such large-scale projects, ensuring that the country’s infrastructure is developed even when the projects are not immediately profitable.
• Promote Social Welfare Rather than Profit Only: Unlike private companies that focus mainly on maximising profits for shareholders, public corporations are more concerned with providing services that improve the welfare of the people. They can operate in rural areas where private businesses may not find it profitable. By focusing on service delivery and development rather than profit alone, public corporations contribute to reducing inequality and promoting fairness in the distribution of goods and services nationwide.

Disadvantages of Public Corporations

• Inefficiency and Waste Due to Poor Management: Public corporations are usually not profit-oriented, which makes managers and workers less committed to efficiency. Since they are funded by the government, workers may not feel pressured to cut costs or maximise productivity. This often results in wastage of resources, delays, and low output compared to private enterprises.
• Political Interference in Operations: The government often appoints the management or board members of public corporations based on political loyalty rather than merit. This can lead to unqualified individuals running important corporations. Political leaders may also influence decisions to favour their interests, which reduces effectiveness and accountability.
• Corruption and Mismanagement of Funds: Because public corporations deal with large sums of money and are less closely monitored, corruption is common. Officials may embezzle funds, inflate contracts, or misuse resources. Mismanagement reduces the corporation’s ability to provide quality services and increases reliance on government subsidies.
• Poor Quality of Services: Unlike private companies that compete for customers, public corporations usually operate as monopolies. Since there is no competition, workers may not care about customer satisfaction. This often results in poor services, frequent breakdowns, and lack of innovation, leaving consumers dissatisfied.

• Slow Decision-Making: Public corporations follow long chains of approval before decisions can be made. Managers must often wait for government approval, which slows down operations. This bureaucracy reduces flexibility and prevents them from responding quickly to problems or market changes.
• Heavy Financial Burden on Government: Public corporations require huge amounts of money to operate, but they do not always generate enough income to cover their costs. As a result, the government has to provide regular subsidies, which puts pressure on public funds. This reduces the money available for other important sectors like education and healthcare.

Final Thoughts

• Public corporations are business organisations owned, financed, and controlled by the government to provide essential goods and services.
• They are established by law, owned by the government, managed by appointed boards, and focus on providing services rather than making profits.
• They provide essential services, reduce exploitation, create employment, and support national development.
• They often face inefficiency, corruption, political interference, and low productivity.

Tags

Public Corporation, Government ownership, Act of Parliament, Board of Directors, Essential services, Non-profit motive, Monopoly, Employment, Subsidy, Political interference, Corruption, Mismanagement, Bureaucracy

Read also: Career Opportunities in Public Sector and Commercial Studies