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What is a Crown Corporation?
A crown corporation is a company that is established and regulated by the government of a country. The term is most widely used in Canada, but can be applied around the world. Crown corporations can be nationally-owned or state-owned, and fully- or partially-owned. They are often run like many other branches of government, with the distinct purpose of financial objectives. The "crown corporation" is specific to Commonwealth states with monarchies, but are known as state-owned enterprises (SOE) or government-owned corporations (GOC) in other countries.
The crown corporation, like a judicial or legislative branch of government, conducts business on behalf of the government, and often with government employees. They have a place unusual in government offices in that they pursue solely commercial affairs. They are, though, like other branches within a government, controlled by legal restrictions and public policies.
In cases like Canada, where a crown corporation is common, the business is technically owned by the “crown,” the actual sovereign ruler of the country. In theory, the crown owns all of the holdings of the government, including the crown corporation, but in practice the businesses are run and owned collectively by the people of the government and the nation. Examples include Air Canada, Canada Post, and Canadian National Railway.
Different levels of control can be exerted on a crown corporation. Sometimes complete control of a corporation can be implemented with a complete staff of government hired or appointed employees. In some cases, these corporations are simply staffed with only chairpersons, directors, and other symbolic heads. The government can maintain an arm’s length from a crown corporation by simply controlling production demands and budget decisions.
The development of the crown corporations began in the colonial era, when governments attempted to exert control over worldwide economies. England, Spain, and France all employed crown corporations at this time. They became prominent again at the beginning of the 20th century, when manufacturing, transportation, and domestic engineering became important industries. Anti-trust laws were soon passed in response to many of these developments, and the crown corporation became less important worldwide with the advent of privatized companies.
In the United States, government-owned corporations were implemented to combat growing monopolies across the country in telecommunications, health care, and banking. By the 1970s, many of these companies were privatized. One of the most important areas of crown corporation around the world is in the oil industry. Many Organization of the Petroleum Exporting Countries (OPEC) nations run government-owned oil companies on their own soil.
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Discussion Comments
@miriam98 - I work in the utilities industry and there are still some countries where the electrical utility industry is government owned.
One big example is Mexico. I can’t argue either way whether it’s a good thing or a bad thing. I think that as long as the utilities continue to function and people are getting their needs met, I have no real objection.
I do understand the article’s point (and yours as well) that traditionally large infrastructure intensive companies, like telecommunications, have been crown corporations.
When the telecommunications meltdown happened, a lot of the privatized companies went bust because they couldn’t afford to support their network. A government owned entity would have survived; although I don’t know if the products they offered would be innovative.
@nony - I think you’re confusing the concept of a crown corporation with the whole notion of command economies in general.
Nowadays crown corporations, if I understand the article correctly, are not about taking control of private industry or even “bailing out” corporations that are deemed too big to fail.
Crown corporations are focused on certain industries, like railroads for example, where government involvement would logically be needed at every step of the way. With these companies, it makes sense to make them government entities.
I can’t imagine a hundred different railroad companies meeting the needs of the people. It would be better to have the government run the whole thing – with perhaps a little private involvement, in the same way that private defense contractors bid on military projects.
Even in a free market system, I believe that there are many people who believe that crown corporations are still a good idea.
This is due to the mistaken belief that governments are more efficient in running corporations than the private sector. Anytime that the government does something like bail out a major corporation or industry, it’s taking control of areas it has no business being involved in, in my opinion.
Private industry runs more efficiently when it has less government intrusion, not more.
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