public company



We explain what a public company is, its origin, objectives and other characteristics. Also, various examples from around the world.

Public companies may be less focused on profit.

What is a public company?

When we talk about a business public or state company we mean a organization or corporation of which the Condition is a partial or total owner (majority shareholder), and in whose management, therefore, it can have a direct or indirect impact on the government. This should not be confused with what in Anglo-Saxon slang is called "Public company”, And that corresponds to the companies of capital opened.

Public companies differ from private ones in their belonging to the State (while the latter reside in the hands of third parties), and are usually part of the heritage public, that is, of the assets of a nation that the State administers on behalf of all.

At the same time, this allows many public companies to pursue objectives different from private companies, and generally less focused on profit and economic performance. It all depends on the guidelines of the economic policy governmental.

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

Some public companies like the BBC were financed through taxes.

Public companies are characterized by the following:

  • In a public company, all or most (50% or more) of the shares belong to the State.
  • They are financed through a combination of own funds (cost effectiveness) and government aid or benefits granted by the State. This in many occasions allows them to operate without worrying too much about accumulating capitals.
  • They are generally dedicated to items considered fundamental or elementary, such as basic services (electricity, drinking water, urban toilet, natural gas, telephony, etc.), or to the resource exploitation key in economy national (like the Petroleum). Sometimes the public company can count on the monopoly of the sector, thanks to the protection of the State.
  • Many of them tend to operate non-profit, offering solidarity rates to their public, without necessarily meaning operating at a loss.

Origin of the public company

The public company has its formal origins in the eighteenth and nineteenth centuries, depending on the nation, when states competed with each other for the economic exploitation of their colonies and by the accumulation of resources that would lead them towards industrialization full.

However, it had its peak in the mid-twentieth century, after the WWII, 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 of the political constellation of the USSR. There, a rapid process of violent nationalization of practically all the industries and national companies, granting full control of the economy to the State.

The expansion of the public company in Europe was associated with the call Welfare state (Welfare State) which sought to improve quality of life his citizens through a greater presence of the State in the economy, without reaching the extremes of the communism.

But this changed radically after 1970, when the first wave of privatizations was unleashed in Europe and the United States, as a result of the prolonged questioning of the economic administration of the State that brought with it the Neoliberalism.

The following years deepened the withdrawal of the public company, proposing as an alternative trust in the laws of the market and its self-regulatory dynamics. This led to a second wave of privatizations, in the early 1990s, in which the scenario was Latin America, and that brought with it very harsh economic and social consequences.

Objectives of the public company

Public companies give the State a greater ability to influence the economy.

Public companies may or may not differ significantly from private companies in terms of their objectives. But when they do, they generally pursue the following goals:

  • Influence the redistribution of income. Since public companies do not pursue individual benefit as a fundamental goal, as is the case with private companies, the money generated by their activities can be used to alleviate them. social inequalities and economic of the population, redistributing wealth to a greater or lesser extent, as the case may be. This often brings with it conflicts regarding where to draw the line between the profitability of the company and the satisfaction of its social tasks.
  • 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 pressure from powerful economic sectors. This, however, can lead to drawbacks such as loss of competitiveness and efficiency.
  • Monopolize key sectors of the economy. Sometimes public companies are created to manage an 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:

  • Corporación de Radio y Televisión Española, S. A. (RTVE). State trading company founded by the Government of Spain in 1945 and dedicated to the dissemination of content on radio and television.
  • Petróleos de Venezuela, S. A. (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 oil exporters in the region.
  • British Broadcasting Corporation (BBC). Famous and recognized public service of radio and television of the United Kingdom, founded in 1922 and that is financed thanks to a tax to all the owners of a television that is managed by the British government.
  • Aerolineas Argentinas (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 were merged. This company was privatized in 1990, bought by the Spanish private group Iberia, and in 2009 it was renationalized by the Argentine State.
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