Public Corporations | Definition, Features, Functions & Purpose

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PUBLIC CORPORATIONS | Definition, Purpose, Structures, Functions & Features

Public Corporations
Public Corporations

Another area of study in Public Administration is public corporation. In this section, we shall look at the definition, purpose, functions, organisation control and problems of public corporations.

Definition of Public Corporation

A public corporation is an organization established by an Act of parliament to provide a specific essential service for the public. The law establishing the corporations may charge it with the provision of water electricity, transportation or waste disposal.

Unlike the civil service whose services are normally free, public corporations are required to charge for the services they provide to the public so as to cover their running expenses. The fees charged are usually below the market price of the service. For instance, the tariff of the Power Holding Company of Nigeria (PHCN) is relatively for Visa-vis the cost of running a power generating plant.

Gantt and Dutto defined public corporation as “a body formally established and regulated under the general law, their shares (if any) being wholly or mainly owned by public authorities”. From the definitions of public corporations, certain features of corporations can be inferred.

Features of Public Corporations

Public corporations have the following characteristics:

  • Public corporations are wholly owned by the government (Federal, State or Local).
  • They are created by law, decree or edict.
  • Public corporations are separate legal. entities. They can sue and be sued, hold property and enter into contracts.
  • They are usually independently financed and they enjoy a high degree of financial autonomy. Their major sources of finance are their own internally generated revenue and government subvention.
  • Public corporations are not subject to direct legislative financial control.
  • Public corporations have a dual character in that they have both public and private characters. In other words, public corporations combine the characteristics of government and business organizations.
  • Employees of public corporations are not civil servants but are employed directly by and subject to conditions of service of the corporations. The employees of public corporations are usually referred to as public servants.
  • The board is responsible for the day-to-day management of the corporation.
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Functions of Public Corporations

Te functions of public corporations include the following:

  • They provide essential services to the people.
  • In times of national disaster, emergency and economic depression, they cater for the displaced people on an ad-hoc basis. The National Emergency Management Agency (NEMA), for example, provided relief materials for the people affected by the Ikeja bomb explosion of January 27, 2001.
  • Since the primary objective of a public corporation is not to make profit, it provides goods and services at the cheapest possible rates.
  • The public corporation helps to protect the citizens from exploitation by private companies whose primary objective is to make profit.
  • The establishment of public corporations fosters equitable distribution of resources and income between individuals and between rural and urban areas.
  • Public corporations help to raise revenue for the government although income generation is not their primary responsibility.
  • They provide employment for the people.

Reasons For Setting Up Public Corporations

  • Provision of essential services: Public corporations are set up mainly to provide essential services for the people.
  • To prevent exploitation: To prevent private individuals from getting involved in these services which may result to exploitation of the people by these private individuals.
  • Huge capital involvement: Public corporations are to provide such services which cannot be provided by individuals owing to huge capital outlay, for example, railway and water.
  • Provision of employment: One of the essential reasons for setting up public corporation is to create employment opportunities for the people.
  • Raising standard of living:  Increase inproductivity and constant supply of these essential services can improve the standard of living.
  • For economic growth: Efficient and adequate provision of these facilities can stimulate or generate investments for both local and foreign businessmen.
  • Strategic projects: To undertake some strategic proj ects for security reasons e.g. minting and arms production.
  • For efficient management and proper control: Government sees itself as having the wherewithal and the potentials to manage these services better. This will make for efficiency and regular supply of these essential services
  • Revenue generation: Government may also establish public corporation for the purpose of generating revenue
  • Propaganda: Public corporations may be established for the purpose of propaganda. Examples are; Radio Corporation and Television Authority .
  • Quick actions: It enables government to carry out some duties that require quick actions which ministries cannot quickly or effectively cany out because of bureaucracy.
  • Foreign control: Another reason is to avoid foreign control of the economy.
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The Organizational Structure Of Public Corporations

  • Political head: The minister is the over all political head of the corporation and gives policy guidelines to the Board of the corporation.
  • Chairman: At the apex of the administration is the chairman who is a government appointee.
  • Board of Directors / Governing board: The Board is made up of appointed directors who initiate and formulate policies for the corporation.
  • Managing Director General manager: They assist the board in the day to-day administration of the corporation and at the same time see to the execution of corporate policies.
  • Key senior officials: The management is made up of key senior officials. They assist the Managing Director/General Manager in overall administration of the corporation. As heads of different units, they also supervise other categories of staff.
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Control Of Public Corporations

  • Legislative control or Acts of Parliament: Public corporations are set up by an Act of parliament. Their powers are stipulated in the Acts.
    Deficient and unproductive: Any public corporation that is deiicient and unproductive could be abolished by the legislature.
    – Auditing:  The accounts of public corporations are always audited by a body set up by the legislature.
    Summoning of officials: The legislature can ask any official to appear before it, if there are allegations of wrong doing.
  • Ministerial Control:
    Dissolution of Board of Directors: A minister whose ministry controls a public corporation can appoint and dissolve board of directors of such corporation.
    Appointment and dismissal: The minister also has the power to appoint and even dismiss some senior categories of staff in any corporation under his control.
    Approval of loans and expenditure: The minister approves any loan to be taken and some major expenditure.

Auditing: The minister also appoints auditors to audit the accounts of public corporations under his control.

– Issuing of directives: He can equally issue directives on matters of any policy in a public corporation.

  • Judicial control or court order: The courts can declare any act made by some corporations illegal or unconstitutional. This is done when they are breaching the Act upon which they were set up.

Denial of services: The judiciary can also stop any public corporation from denying its services to any customer e.g. PHCN.

  • – Finance: Most public enterprises depend to a large extent on government for allocations to meet their running costs. Government may withhold such allocation.

Budget: This is usually debated upon. Senior official or the minister responsible for the enterprise can be questioned before the legislative committee.

Annual Report: Annual reports of public corporations are presented to the parliament for scrutiny.


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