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Business Environment – Statutory Bodies and Corporations

Business Environment - Statutory Bodies and Corporations

Business Environment – Statutory Bodies and Corporations:

Statutory companies are known as Statutory Bodies and Corporations or Public Corporations. These are the public bodies operated by the statute. For e.g. – Reserve Bank of India (RBI), Life Insurance Corporation (LIC), Employee State Insurance Corporation etc.  In simple terms, it means a company or a body set up by statute.

The essential features of a public corporation are as under

  1. Management: Statutory Corporations are managed by the Board of Directors, appointed by the government.
  2. Accountability: Statutory Corporations are account and audited by the Comptroller & Auditor of India (CAG) as they are accountable to public & parliament. This ensures public accountability.
  3. No Interference: In day to day working of the corporation, political interference is not allowed because Statutory Corporations have its own pattern.
  4. Objectives: It works on profit objective and as such its activities are commercial in nature.
  5. Answerability: It is answerable to the Parliament as regards to its objectives.
  6. Capital Contribution: Its capital is wholly owned by the Government. The public is not the shareholders of this type of organization as compared to that of Government Company.

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Advantages of a Statutory Corporation:

  1. Formation: Statutory Corporations are easy to be formed. They can be easily formed by passing Special Act, either at legislature Assembly or at the Parliament.
  2. Autonomy: There is no political interference in day to day working of the corporation. Statutory Corporations can have its own working pattern.
  3. Flexibility: Statutory Corporations enjoy full flexibility in its operations. It is free to take any decision related to investment, capital collection, production, recruitment, planning, accounting, etc.
  4. Capital Raising: Capital is contributed at large by the government to the statutory corporations but they can easily and freely collect capital from the general
  5. Quick decisions: Quick decisions are possible because all the decisions are taken by the Board of Directors and Board can implement these decisions easily.
  6. Staff Members: These corporations are free to have its own recruitment policy.

 

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Disadvantages of a Statutory Corporation:

  1. Difficult Formation: Incorporation of Statutory Corporations is difficult and lengthy. They require lengthy documentation, complicated formalities & passing of statute.
  2. Rigidity: The policies once approved, the statute once passed require cannot be changed easily. It can be done by the parliament only & this is also very time-consuming.
  3. Political Interference: The efficiency of the corporation is affected due to the political interference.
  4. Wastage of Resources: Wastage of physical, capital and manpower resources in several cases is very often with statutory corporations.

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For more cs foundation course important topics : 

Business Economics – Determinants of Price Elasticity of Demand

Business Economies – Forms of Market – CS Foundation

Central Problems of an Economy – topic of CS Foundation

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