Corporatization
Encyclopedia
Corporatization refers to the transformation of state assets or agencies into state-owned corporations in order to introduce corporate management techniques to their administration. Corporatization is sometimes a precursor to partial or full privatization
, which almost always refers to a process by which formerly public assets or functions are sold or given to corporate entities by listing the shares of the state-owned corporation on publicly-traded stock exchanges. A common model is for state institutions to be corporatized and operated as autonomous joint-stock companies, while still being majority state-owned and run by state entities separate from a central government. This concept is a major feature of the socialist market economy
.
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
, away from autonomous 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.
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 market
s, 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.
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
, which almost always refers to a process by which formerly public assets or functions are sold or given to corporate entities by listing the shares of the state-owned corporation on publicly-traded stock exchanges. A common model is for state institutions to be corporatized and operated as autonomous joint-stock companies, while still being majority state-owned and run by state entities separate from a central government. This concept is a major feature of the socialist market economy
Socialist market economy
The socialist market economy or socialist market economy with Chinese characteristics is the official term used to refer to the economic system of the People's Republic of China after the reforms of Deng Xiaoping. It is also referred to as socialism with Chinese characteristics...
.
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
Corporate nationalism
Corporate nationalism is a phrase that is used to convey various meanings, including:*A political culture, in which members believe the basic unit of society and the primary concern of the state is the corporate group rather than the individual, and that the interests of the corporate group are the...
, away from autonomous 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 neoliberalNeoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
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
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
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
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
. Corporatization has been the policy of the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
and has been used in New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
and most states of Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
in the reform of their electricity market
Electricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
s, 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 industryWater industryThe water industry provides drinking water and wastewater services to residential, commercial, and industrial sectors of the economy. The water industry includes manufacturers and suppliers of bottled water...
and water privatizationWater privatizationWater privatization is a short-hand for private sector participation in the provision of water services and sanitation, although sometimes it refers to privatization and sale of water resources themselves . As water services are seen as such a key public service, water privatization is often...
.