Merits and Demerits of Statutory Corporation

Statutory Corporations are autonomous corporate bodies established by a special act of Parliament or a state legislature, with predefined functions, duties, powers, and immunity as defined by the act. Statutory corporations have financial autonomy and are accountable to the legislature under which they were established.

Merits of Statutory Corporation

1. Initiative and Flexibility: The operations and management of a statutory organisation are carried out independently, without the intervention of the government, and with initiative and flexibility.

2. Administrative Autonomy: Administrative autonomy refers to the ability of a public corporation to manage its affairs independently and with flexibility.

3. Quick Decisions: Because there is less file work and formality to complete before making decisions, a public corporation is relatively free from red tapism.

4. Staff that works Efficiently: Public corporations can set their own rules and regulations for remuneration and employee recruitment. It can provide better facilities and more appealing terms of service to its employees to ensure that they work efficiently.

5. Professional Management: The statutory corporation’s board of directors is made up of business experts and government-nominated representatives from various groups, such as labours and consumers.

6. Easy to raise Capital: Because these corporations are wholly owned by the government, they can easily raise needed funds by issuing low-interest bonds. The public is also comfortable subscribing to these bonds because they are safe.

Demerits of Statutory Corporation

1. Autonomy only on Paper: The autonomy and flexibility of public corporations are merely symbolic. Ministers, government officials, and political parties frequently interfere with the smooth operation of these operations.

2. Lack of Initiative: Public corporations are not subject to competition and are not motivated by profit. As a result, employees do not take the initiative to increase profits and decrease losses. The government compensates public corporations for their losses.

3. Rigid Structure: The act defines the objects and powers of public corporations, and these can only be changed by amending the statute or the act. Repealing the act is a time-consuming and difficult process.

4. Conflict of Interests: The board of directors is appointed by the government, and their job is to manage and operate corporations. Because there are so many members, their interests may collide. The corporation’s smooth operation may be hampered as a result of this.

5. Unfair Practices: A public corporation’s governing board may engage in unfair practices. To hide inefficiency, it may charge an exorbitant price.

6. Suitability: The public corporation is appropriate only where the undertakings require monopoly powers or special powers as defined by law.