What are the Advantages and disadvantages of statutory corporation?

Answer 1

The advantages of statutory corporations are as follows:-

(1)Formation: Formation of Statutory Corporations is easy. It can be easily formed by passing Special Act, either at Legislature Assembly or at Parliament.

(2) Autonomy: Statutory corporations can have its own working pattern. There is no political interference in day to day working of corporation.

(3) Flexibility: Statutory corporations enjoy full flexibility in its operations. It is free to take any decision relating to capital collection. Investment, market, production, recruitment, planning, accounting & the decision once taken can be easily changed.

(4)Capital Raising: Government contributes the capital at large for statutory corporations, but statutory corporations are free to collect capital from general public.

(5) Quick Decisions: Quick decisions are possible because all policy decisions are taken by the Board & board can implement these decisions easily. There is no interference of government in any type of decisions.

(6) Staff Members: Statutory corporations is free to have its own recruitment policy. It can recruit, promote, and transfer any employee / officer as per its requirement.

(7) Economies of Scale: Statutory corporations operates on large scale & enjoy the economies of large scale operations.

(8) Separate Entity: Like joint stock company, statutory corporations enjoys separate legal status.

(9) Self Accounting System: Statutory corporations is free to have its own accounting pattern. It need not follow Budgetary Accounting & Audit Control of government. It is free to prepare its own budget.

(10) Social Welfare: The main object of statutory corporations is to provide necessary services at a lower price. It works for protecting the interest of common people. Hence society at large is benefited.

The disadvantages of statutory corporations are as follows;-

(1) Difficult Formation: It is very difficult to form statutory corporations because it requires lengthy documentation, complicated formalities & passing of statue.

(2) Rigidity: The policies once approved, the statue once passed cannot be changed easily. It can be done by the parliament only & this is very time consuming.

(3) Political Interference: Statutory corporations are subject to political interference & this affects the efficiency of the corporation.

(4)Suitability: Statutory corporations is suitable only for giant size business but is not suitable for small size business.

(5) Inefficiency: Statutory corporations always lacks efficiency. This is because of rigid policies of management or the government.

(6) Monopoly: Statutory corporations enjoy total monopoly & private sector cannot compete with it. This encourages monopoly & defeats the motive of statutory corporations.

(7) Wastage of Resources: There is often wastage of physical, capital and manpower resources in several cases.