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Chapter: 11th Commerce : Chapter 9 : Government Organisation

Advantages and Disadvantages of Public Corporation

Bold Management due to Operational Autonomy

Advantages of Public Corporation

i. Bold Management due to Operational Autonomy

A public corporation enjoys internal operational autonomy; as it is free from Governmental control. It can, therefore,  run in a businesslike manner. Management can take bold decisions involving experimentation in its lines of activities, taking advantage of business situations.

ii. Legislative Control

Affairs of a public corporation are subject to scrutiny by Committees of Parliament or State Legislature. The Press also keeps  a watchful eye on the working of a public corporation. This keeps a check on the unhealthy practices on the part of the management of the public corporation.

iii. Qualified and Constented Staff

Public corporation offers attractive service conditions to its staff. As such it is able to attract qualified staff. Because of qualified and contented staff, industrial relations problems are not much severe. Staff has a motivation to work hard for the corporation.

iv. Tailor-Made Statute

The special Act, by which a public corporation is created, can be tailor-made to meet the specific needs of the public corporation; so that the corporation can function in the best manner to achieve its objectives.

v. Not Affected by Political Change

Being a distinct legal entity, a public corporation is not much affected by political changes. It can maintain continuity of policy and operations.

vi. Lesser Likelihood of Exploitation

The Board of Directors of a public corporation consists of representatives of various interest groups like labour, consumersetc. Nominated by the Government. As such, there is lesser likelihood of exploitation of any class of society, by the public corporation.

vii. Reasonable Pricing Policy

A public corporation follows a reasonable pricingpolicy, basedoncost-benefitanalysis. Hence, public are generally satisfied with the provision of goods and services, by the public corporation.


Disadvantages of Public Corporation

i. Autonomy and Flexibility, Only in Theory

Autonomy and flexibility advantages of a public corporation exist only in theory.  In practice, there is a  lot  of  interference in the working of a public corporation by ministers, government officers and other politicians.

ii. Misuse of Monopolistic Power

Public corporations often enjoy monopoly in their field of operation. As such, on the one hand they are indifferent to consumer needs and problems; and on the other hand, often do not hesitate to exploit consumers.

iii. Rigid Constitution

The constitution of a public corporation is very rigid. It cannot be changed, without amending the Statute of its formation. Hence, a public corporation could not be flexible in its operations.

iv. Low Managerial Efficiency

Quite often civil servants, who do not possess management knowledge and skills, are appointed by the government on the Board of Directors, of a public corporation. As such, managerial efficiency of public corporation is not as much as found in private business enterprises.

v. Problem of Passing a Special Act

A public corporation cannot be formed without passing a special Act; which is a time consuming and difficult process. Hence, the scope for setting up public corporations is very restricted.

vi. Clash of Divergent Interests

In the Board of Directors of public corporation, conflicts may arise among representatives of different groups. Such clashes tell upon the efficient functioning of the corporation and may hamper its growth.


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11th Commerce : Chapter 9 : Government Organisation : Advantages and Disadvantages of Public Corporation |

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