Advantages and Disadvantages of Government Company

Advantages of Government Company

i. Easy Formation

A Government company can be easily formed under the Companies, Act, just by an executive decision of the government.

ii. Internal Autonomy

A government company  can  manage its affairs independently. It is relatively free from ministerial control and political interference, in its day-to-day functioning.

iii. Private Participation

Through   Government    company  device, the government can avail of the management skills,  technical  know- how and expertise of the private sector and foreign countries. For example, the Hindustan Steel Limited has obtained technical and financial assistance from the U.S.S.R., West Germany and the U.K. for its steel plants at Bhilai, Rourkela and Durgapur.

iv. Easy to Alter

Objectives and powers of the Government Company can be changed by simply altering the Memorandum of Association of the company, without seeking the approval of the Parliament.

v. Discipline

The Government Company is subject to provisions of the Companies Act; which keeps the management of the company active, alert and disciplined.

vi. Professional Management

A Government company can employ professionally qualified managers; because it has its own personnel policies.

vii. Public Accountability

The Annual Report of a Government company is presented to the Parliament/ State Legislature. These reports can be discussed and debated there.

Disadvantages of Government Company

i. Board of Directors Packed with ‘Yes-Men’

On the Board of Directors of a government company, there are Government appointed directors (Government being the major shareholder); who are ‘yes-men’  of the Government. They are unable to run the company, in a businesslike manner.

ii. Autonomy Only in Name

Independent character of a Government company exists only in name. In reality, politicians, ministers, Government officials, interfere excessively in the day-to-day working of the government company.

iii. A Fraud on Companies Act and Constitutions

A Government company is criticized as being a ‘fraud on the Companies Act and on the Constitution. This criticism is valid on the ground  that  the  Government   can   exempt a  Government company  from   application of several provisions of  the  Companies Act. Again, the Parliament is not taken into confidence, while creating a Government company.

iv. Fear of Exposure

The annual report of the government company is placed before the Parliament/ State Legislature. The working of the company is exposed to Press criticism: Therefore, managementofthe Government Company often gets demoralized and may not take initiative to come out with and implement something innovative.

v. Lack of Expertise in Deputationists

Thekey personnel ofa Governmentcompany are often deputed from Government departments. These deputationists generally lack expertise and commitment;  leading  to lower operational efficiency of the government company.

vi. Selfish Functioning

The Government Company works neither for the government nor for the public at large. It serves the personal interests of people who work in the company and who dictate policies of the company.

list of Government Company and their Logo