12 Important Pros and Cons of Public Corporations

A public corporation is a form of business whose shares are traded freely on the stock exchange market. They are created by the state to provide public services. They also provide services that are also provided by the private sectors.

They are fully owned by the state and they are created by law. Examples of public corporations include the BBC and American International Groups.

pros and cons of public corporations

Pros of Public Corporations

  1. They have limited liability

The shareholders are only liable for the amount of their investment in the company. In case the liabilities are more than the shareholders will not be liable to them.

  1. Long existence

The corporation has ling existence as they are fully owned by the state and operate under the law which makes it difficult to close it.

  1. Easy to get additional capital

The corporations can easily get additional capital as it can sell its shares to the public or issuing bonds to members of the public.

  1. Shares can be transferred

In this form of business, shares can easily be transferred because they trade freely on the stock exchange market. The shareholders can sell some of their shares to well-performing companies hence an advantage to them.

  1. Free from government control

As corporations are created by the state they enjoy free government control. This makes it not to operate under strict laws of the government.

  1. Accountability

The corporations have public accountability hence it is not easy for the investors to lose their funds in the course of its operation.

Read More: Pros and Cons of B Corporation 

Cons of Public Corporations

  1. Difficulty in management

As it comprises of a lot of shareholders, it is very difficult to manage the corporation. This can also result from the transferability of shares whereby a shareholder is free to transfer his or her shares at any time.

  1. Political interference

The corporations can easily be manipulated by politics as it is fully owned by the state. This can affect its operation whereby it can operate at losing during that time.

  1. Charging too much for a product

The state controls everything and this may make it decide on the price of the commodity which may be too much for the consumer.

  1. Power can easily be misused

The corporation may employ people basing on who is known to state not because they qualify for the position hence power being misused.

  1. Easy to produce low-quality goods

The state may decide on the price to be put on the products hence the producer may decide to produce low-quality goods so that they may also benefit from the deal.

  1. Expensive to maintain and operate

The corporations are big business enterprises so it may turn out to be difficult in operating it as it requires a lot of finance to run it.

Read More: Pros and Cons of C Corporation 

Summary

The corporations can be good at times and also bad sometimes. When there is political influence, it may end up misusing the investors which really discourage new investors to the company.

Leave a Comment