Corporatization

Corporatization is the process of transforming state assets, government agencies, or municipal organizations into corporations. It refers to a restructuring of government and public organizations into joint-stock, publicly listed companies in order to introduce corporate and business management techniques to their administration.^[1] The result of corporatization is the creation of state-owned corporations where the government retains a majority ownership of the corporation's stock. However, in many cases, corporatization is a precursor to partial or full privatization, which involves a process where formerly public functions and public enterprises are sold to private business entities by listing their shares on publicly traded stock exchanges.

Corporatization of state enterprises and collectively owned enterprises was a major component of the economic restructuring program of the People's Republic of China. China's contemporary "socialist market economy" is based on a corporatized state sector where state companies are owned by the central government but managed in a semi-autonomous fashion.^[2]

In contrast, the term may also refer to the construction of state corporatism, where state-owned corporations are created and delegated public social tasks resembling corporate nationalism as an alternative to privatization. Corporatization can also refer to non-corporate entities like universities or hospitals becoming corporations, or taking up management structures or other features and behaviors employed by corporations.

Overview

The move towards neoliberal economic reform in the 1980s led to privatization of public functions in many countries. Corporatization was seen as a half-way house on the road to privatization. The effect of corporatization has been to convert state departments into public companies and interpose commercial boards of directors between the shareholding ministers and the management of the enterprises.

These state-owned enterprises are organized in the same manner as private corporations, with the difference that the company's shares remain in the ownership of the state and are not traded on the stock market. Corporatization has been the policy of the People's Republic of China and has been used in New Zealand and most states of Australia in the reform of their electricity markets, as well as in many other countries and industries (e.g. Dutch water supply companies).

Although corporatization is to be distinguished from privatization (the former involves publicly owned corporations, the latter privately owned ones), once a service has been corporatised it is often relatively easy to privatise or part-privatise it, for example by selling some or all of the company's shares via the stock market. In some cases (e.g. the Netherlands in regard to water supply) there are laws to prevent this.

Major areas

Some major areas of services which have been corporatized in the past include:

• National railroads, the initial impetus to corporatization of functions that had belonged to national and local governing bodies began in the sphere of national railroad construction in the mid-19th century.
• Corporatized highways, for example toll roads.
• Corporatized electricity.
• Corporatized water, for example, the Dutch water supply companies are publicly owned corporations (mostly by municipalities, but also by regional governments). For involvement of private corporations in water supply, see water industry and water privatization.

See also

Examples:

• New Zealand Electricity Market

References

• Transnational Institute, Public Services Yearbook 2005/6: Beyond the Market. The Future of Public Services
• Ben Manski and John E. Peck, Corporatization in the US: An Internal Clash of Civilizations
• Maude Barlow and Tony Clarke, Blue Gold: The Fight to Stop the Corporate Theft of the World's Water 2002.
• Sozzani, Joseph, Privatization in the United States and Australia: A Comparative Analysis of the Modern Privatisation Movement in Corrections