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.
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.
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.