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Corporatization refers to the transformation of state assets or agencies into state-owned corporations in order to introduce corporate management techniques to their administration. Corportaization 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.[1] 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.

Contents

Overview

The move towards neoliberal 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 markets, 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 industry and water privatization.

See also

References

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