We explain what a public company is, its origin, objectives and other characteristics. Also, various examples from around the world.
What is a public company?
When we talk about a public company or state-owned company we are referring to an organization or corporation of which the State is a partial or total owner (majority shareholder), and whose administration, therefore, the government can influence directly or indirectly. This should not be confused with what in Anglo-Saxon jargon is called “Public Company”, and which corresponds to open capital companies.
Public companies differ from private companies in their belonging to the State (while the latter reside in the hands of third parties), and are usually part of the public heritage that is, the assets of a nation that the State administers on behalf of everyone.
At the same time, this allows many public companies to pursue different objectives than private ones, and to generally be less focused on profit and economic performance. It all depends on the guidelines of the government's economic policy.
Public companies can arise spontaneously, founded by the public sector itself, or as a result of processes of nationalization or expropriation of private companies by the State. The opposite process, of taking a public company into private hands, is known as privatization.
Characteristics of public companies
Public companies are characterized by the following:
- In a public company, all or the majority (50% or more) of the shares belong to the State.
- They are financed through a combination of own funds (profitability) and government aid or benefits granted by the State. This often allows them to operate without worrying too much about accumulating capital.
- Generally are dedicated to areas considered fundamental or elementary, such as basic services (electricity, drinking water, urban sanitation, natural gas, telephone, etc.), or to the exploitation of key resources in the national economy (like oil). Sometimes the public company can have a monopoly in the sector, thanks to the protection of the State.
- Many of them usually operate on a non-profit basis offering solidarity rates to its public, without this necessarily meaning operating at a loss.
Origin of the public company
The public company It has its formal origins in the 18th and 19th centuries depending on the nation, when States competed with each other for the economic exploitation of their colonies and for the accumulation of resources that would lead them towards full industrialization.
However, had its peak in the middle of the 20th century after the Second World War, when many nations of the world chose to nationalize private companies whose activities were considered crucial for the political and economic stability of the country.
In the following decades, all countries had key public companies, especially the socialist countries in the political constellation of the USSR. There, a rapid process of violent nationalization of practically all national industries and companies was carried out, granting full control of the economy to the State.
The expansion of the public company In Europe it was associated with the so-called Welfare State (Welfare State) that sought to improve the quality of life of its citizens through a greater presence of the State in the economy, without reaching the extremes of communism.
But This changed radically after 1970, when the first wave of privatizations broke out in Europe and the US the result of the prolonged questioning of the economic administration of the State that Neoliberalism brought with it.
The following years deepened the withdrawal of public companies, proposing as an alternative trust in the laws of the market and its self-regulation dynamics. This led to a second wave of privatizations, in the early 1990s, whose setting was Latin America, and which brought with it very harsh economic and social consequences.
Public company objectives
Public companies may or may not differ significantly from private companies in their objectives. But when they do, they generally pursue the following goals:
- Influence income redistribution. Since public companies do not pursue individual profit as a fundamental goal, as is the case with private companies, the money generated by their activities can be used to alleviate the social and economic inequalities of the population, redistributing wealth to a greater or lesser extent. , as the case may be. This often brings about conflicts over where to draw the line between the company's profitability and the fulfillment of its social missions.
- Consolidate the economic autonomy of the State. Public companies provide the State with a greater capacity to influence the national economy, but also a source of wealth generation under its control, which makes it more resistant to pressures from powerful economic sectors. This, however, can bring with it drawbacks such as loss of competitiveness and efficiency.
- Monopolize key sectors of the economy. Sometimes public companies are created to manage the entire economic sector that the State considers too important to leave in private hands, as is often the case with basic services or with national industries that are too lucrative and central to the national GDP.
Examples of public companies
Some examples of public companies from different countries are the following:
- Spanish Radio and Television Corporation, SA (RTVE). State commercial company founded by the Government of Spain in 1945 and dedicated to the dissemination of content on radio and television.
- Petróleos de Venezuela, SA (PDVSA). Venezuelan national company created in 1976 and dedicated to the exploitation of the immense oil resources of this South American nation. For the next 30 years it was one of the largest crude oil exporting companies in the region.
- British Broadcasting Corporation (BBC). Famous and recognized public radio and television service in the United Kingdom, founded in 1922 and financed by a tax on all owners of a television set managed by the British government.
- Argentine Airlines (AA). Argentine aeronautical company, the largest in its country and the fifth most important in South America, founded in 1950 by a decree of President Juan Domingo Perón, in which four predecessor airlines merged. This company was privatized in 1990, bought by the Spanish private group Iberia, and in 2009 it was renationalized by the Argentine State.
Continue with: Private company
References
- “Public company” on Wikipedia.
- “What is a public company and what are its characteristics?” in VERY Financial.
- “Public sector intervention mechanisms. Public companies” by Luis Hierro at the University of Seville (Spain).
- “Public Enterprise” in The Encyclopaedia Britannica.
