Government-owned corporation

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A government-owned corporation, state-owned enterprise or government business enterprise is a legal entity created by a government to undertake commercial or business activities on behalf of an owner government. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used inter-changeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs. While they may also have public policy objectives, SOEs should be differentiated from other forms of government corporation or entity established to pursue purely non-financial objectives that have no need or goal of satisfying the shareholders with return on their investment through price increase or dividends.

SOEs can be fully owned or partially owned by Government. As a definitional issue, it is difficult to determine categorically what level of state ownership would qualify an entity to be considered as "state-owned", since governments can also own regular stock, without implying any special interference. As an example, the Chinese Investment Corporation agreed in 2007 to acquire a 9.9% interest in the global investment bank, Morgan Stanley, but it is unlikely that this would qualify them as a government-owned corporation.

1 By region
2 See also
3 Further reading

[edit] By region

[edit] Western Europe

In Western Europe there was a massive nationalization throughout the 1900s, especially after World War II to ensure Government control over natural monopolies and to some extent industry. Typical sectors included telecommunications, power, petroleum, railways, airports, airlines, public transport, health care, postal services and sometimes banks. Many large industrial corporations were also nationalized or created as Government corporations, including among many British Steel, Statoil and Irish Sugar. Starting in the late 1970s and accelerating through the 1980s and 1990s many of these corporations were privatized, though many still remain wholly or partially owned by the respective governments.

A state-run corporation needs to be distinguished from an ordinary limited liability corporation owned by the state. For example, in Finland, state-run corporations (liikelaitos) are governed by a separate act. Even though responsible for their own finances, they cannot be declared bankrupt; the state answers for the liabilities. Conversely, the state can directly fund unprofitable business. Stocks of the corporation are not sold and loans have to be government-approved, as they are government liabilities. In contrast, the state also owns controlling interest in ordinary limited liability corporations.

[edit] United States

In the United States, businesses that are government owned include the National Railroad Passenger Corporation (d/b/a Amtrak), Tennessee Valley Authority, Corporation for Public Broadcasting and the United States Postal Service. Many states have government owned businesses for operations as well (e.g. North Dakota Mill and Elevator or South Dakota Public Broadcasting). Generally speaking, a statute passed by a legislature specifically sets up a government owned company in order to undertake a specific public purpose with public funds or public property.

[edit] China

In the People's Republic of China, there are a number of different corporate forms which result in a mixture of public and private capital. In PRC terminology, a state-owned enterprise refers to a particular corporate form, which is increasingly being replaced by the listed company. State-owned enterprises are governed by the State-owned Assets Supervision and Administration Commission of the State Council.

[edit] Commonwealth

In monarchical Commonwealth countries, particularly Canada, country-wide government corporations often use the style "Crown corporation." Equivalent terms include "state-owned enterprises" and "Crown entities" in New Zealand, and Government Business Enterprise (GBE) in Australia. Examples of Crown corporations include the CBC in Canada and Air Canada before it underwent privatisation. Cabinet ministers (Ministers of the Crown) often control the shares in such public corporations.

At the level of local government, territorial or other authorities may set up government corporations such as "Local Authority Trading Enterprises" (LATEs). Many local authorities establish services such as water supply as separate corporations or as a business unit of the authority.

[edit] Japan

In Japan, Japan Post was reorganized into Japan Post Group in 2007 as a material step of the postal privatization. It is currently wholly owned by the government, but is planned to be sold into private ownership. Japan Railways Group (JR), Nippon Telegraph and Telephone (NTT) and Japan Tobacco (JT) were formerly owned by the government.

[edit] OPEC

In most OPEC countries, the governments prefer to own the oil companies operating on their soil. A notable example is the Saudi national oil company, Saudi Aramco, which the Saudi government bought in 1988 and changed its name from Arabian American Oil Company to Saudi Arabian Oil Company. The Saudi government also owns and operates Saudi Arabian Airlines, and owns 70% of SABIC, as well as many other companies. They are, however, being privatized gradually.