This is the net price to which the government has stakes in. The government owns a certain percentage of the enterprises shares.
Where a government has a fall ownership of the corporation, the business enterprise is known as a parastatal Some public corporations are profit seeking while other are not.
examples of such public corporations include;
- Kenya pipeline
- Kenya airways
- KCB (Kenya commercial Bank)
- Kenya lighting company (KPLC)
Parastatals are run to provide the essential services such as education, medical etc.
Similarities between public cooperation’s and joint stock companies.
- They are both legal entities
- They are governed by a board of directors appointed
- They are self financing.
Public corporations
1. A cooperation is wholly and partially owned by the government
2. Corporations tend to be monopolists
3. Are operated on public interest not entirely on profit motive.
4. They are paid for by the public from the taxes collected by the government.
Joint stock companies
1. Owned by the public and has shareholders.
2. They are subjected to companies
3. Purely operate on a profit motive.
4. Private funds finance joint stock companies.
Parastatal Bodies
A parastatal body is an organization distinguished from a body government but in which the government is a sole owner. They are established by the government to perform specific functions and their management is in the hands of board of directors.
The board of directors is appointed by the government and the parastatals bodies do not sell shares since they are whole financed by the government.
Examples
- Marketing boards
- Coffee board of Kenya e.t.c.
Marketing Boards
These are produce organizations set up to encourage and control of the Agricultural produce. Their objective is to protect producers and consumers and may be formed by both producers coming together or be constituted by the government.
Classification of Marketing Boards
1. commodity marketing boards- these are producer organizations with objectives are restricted to purchasing and selling of commodities e.g coffee, tea, pyrethrum
2. producer marketing boards- this is a produce organization dealing with a wide range of products e,g maize, wheat e.t.c
3. Expert marketing boards- this concentrate on marking one or more products overseas e.g KTDA or coffee board.
Functions of Marketing Boards.
1. To encourage and control the marketing of Agricultural produce through purchasing at fixed prices to facilitate stable incomes
2. To encourage income and price stability through the buffer stock in buffer funding system.
3. To facilitate farmers to obtain loans for farm inputs e.g quality fertilizers, seeds and equipment.
4. To support the government in licensing regulations
5. To provide a wide range of sport e.g transport, grading, packaging of products e.t.c
6. Marketing boards provide advisory advise to farmers
7. They facilitate research on agricultural products and markets.
Formation of a Public Cooperation
They are formed by a specific Act of parliament which define and powers and the overall mandate of there institutions. The law creating corporations also state the minimum capital under which they will operate. The corporations are viewed as separate legal entities and may be wholly or partially owned by the government.
Management of Public Corporations.
This is under a board of directors. The directors are appointed by the government when the government owns wholly the corporation or relevant joint directors and government appointed directors where the government owns partially the cooperation.
The government influences decisions of the corporations either directly or indirectly e.g pricing decisions. In Kenya the board of directors is appointed by the relevant ministries or by the president. It is this board which is responsible for the implementation of the policies of the organization. The board may employ professional managers charged with the day to day running corporations.
Sources of Share Capital
1. Public corporations may get their capital from the government through loans or budgetary provisions.
2. Where the government own corporations jointly both contributions of capital and the public will raise capital through issuing shares.
3. As a body corporate a public corporate has power to borrow money from financial institutions.
Features of a Public Corporation
1. A service motive- they provide essential services to the citizens and may therefore not aim at making profits – entirely.
2. They are formed by an Act of parliament which states that government ministries will take charge of such corporations.
3. They are subsidized by the government to enable them provide essential goods and services at minimum fees.
4. The board of directors is wholly appointed by the government or jointly with other stake holders to influence the policies of the cooperation.
5. They are financed by the government but for jointly owned public corporations.
6. It has a legal distinct from the government or any other owners
7. They have limited liability
Advantages of Public Corporations.
1. Raising initial capital is each since funds comes from the government
2. Public corporations improve the welfare of the people since basic goods and services are offered at affordable prices
3. The company has limited liability
4. They are used to meet government objectives.
Disadvantages of Public Corporations
1. Political influence may lead to a week management
2. Public corporations may not respond to consumer needs since some operate as monopolist.
3. Public corporations have a public interest making them difficult to achieve their objectives.
4. The job insecurity of senior managers e,g C.O.S , may lead to dishonest management
5. Slow decision making because of the size of same public corporations
6. most corporations are loss making
Dissolution of Public Corporations.
Since formation of a public corporation is by an Act of parliament it follows therefore, that in order to dissolve such an organization onc would have to repeal the Act of parliament under which they are allowed. The following reasons may lead to repealing the Act of parliament under which they are formed.
1. Perpetual operations of the corporation of a loss
2. Outright insolvency.
3. Mismanagement which mat adversely affect the performance of the corporation
