DEFINITION of Crown Corporation
A crown corporation is any corporation that is established and regulated by a country's state or government. This is the opposite of private companies, which are privately owned, structured and operated to serve the owners of the company. A crown company is commercially owned by the government. Civil servants partially control and operate this type of company, which is meant to serve the public interest as determined by the current government.
BREAKING DOWN Crown Corporation
Crown corporations could either be a federal corporation, owned by the government to serve a federal or national interest, or a provincial/territorial corporation, which is meant to serve a provincial or regional interest. There are also contexts in which the government has a controlling interest, perhaps by owning the majority of voting shares and having the ability to appoint the majority of ruling members of the corporations, according to the New Zealand Treasury Department. They are more common in Commonwealth countries such as Canada, New Zealand and Australia.
Crown Corporations and Conflicts of Interest
These companies are created by the government and can be entirely or partially owned by the public sector. This has, historically, created some confusion around their status. Are they a government body, or a private corporation or enterprise?
In a report from the Treasury Board entitled "Review of the Governance Framework for Canada's Crown Corporations", it stated that crown corporations are "instruments of public policy." This would lead one to believe that crown corporations exist and are formed to advance policy objectives. However, some of these crown corporations also have commercial interests and obligations, and competitive pressures to address. This can, at times create a conflict of interest between policy objectives and commercial obligations and goals.
Crown Corporations, Funding and Autonomy
The funding structures for crown corporations varies. Some are entirely government-funded, others are completely financially self-sufficient, profit making entities. In the latter case, these crown corporations pay dividends, and the government, as the solitary stakeholder, collects profits.
The funding structures for crown corporations also determines, to a large extent, how much autonomy a crown corporation has. Profit-seeking crown corporations in competitive markets, for example, are classified differently than other crown corporations, are not typically subject to as much government oversight as other crown corporations—for example they don't have to submit annual operating budgets.
Generally speaking, though, the government has a large degree of discretion, as the government typically makes final decisions regarding the CEO and board members. All crown corporations have to undergo an annual audit, most have to submit annual corporate plans, operating budgets, and capital budgets for approval, and quarterly reports. The government can issue directives to the board, and most crown corporations undergo some extensive "special examination" every 10 years. This according to CBC.
Recently, there have been debates as to whether or not there is enough oversight of crown corporations.
They are also referred to as government owned, state-owned enterprises, crown entities, or government business enterprise (GBE).