Chapter 6: Crown Corporations:
Words used to denote a organization: crown corporation, mixed enterprise, joint enterprise, and
established through their own legislation or through incorporation under the
federal or provincial companies
one authority defines crown corporations as “companies in the ordinary sense
of the tern whose mandate relates to industrial, commercial, or financial
crown or whose sole shareholder is the government or the crown.
however this definition leaves out certain noncommercial entities t
hat are defined as crown corporations in law at the federal level (e.g
the Canada employment insurance company”
it is important that an organization that carries out government policy be closely
controlled by the political execution
however, when an organization has a predominantly commercial mandate,
political concerns might interfere with that mandate
the federal government classifies its corporate holdings in a number of
“parent corporations”: are corporations that are one hundred percent owned
by the federal government
e.g. Canada post corporation is for instance responsible to the minister of
national revenue, while the Canadian dairy commission reports to the
minister of agriculture and agrifood.
these parents corporations can be further classified into two categories, agency
corporations and proprietary corporations.
There are also three classes of subsidiaries of a parent corporation
1.) “Wholly owned subsidiaries”
2.) “other subsidiaries”
There are four other types of corporations that are less directly controlled by the
“mixed enterprises” are corporations whose shares are owned partly by the
government of Canada and partly by private sector parties.
There are now no mixed enterprises at the federal level.
“joint enterprises” are similar to mixed enterprises except that the other
shareholder is another level of government
The “Shared governance” entity is another type of corporate form.
The government has no financial interest in these bodies, but can
participate in the appointment or nomination of individuals to their
e.g. the agricultural and food council of Alberta
“international enterprises” are corporate entities created pursuant to I
international agreements, under which Canada holds shares or has a right to
appoint or elect some number of members to a governing body. ex. International monetary fund
“public enterprises” is the most general term, usually used to encompass all
the above terms
Structure and operation of crown corporations:
at the top sits the chair of the board of directors and other members of the board
their job is to provide the overall directions for the company
Reporting to the board is the president and chief executive officer (CEO)
he/she is responsible for the management and day to day activities
unlike board members who are typically part time, CEO’s are fulltime
Below them, we find the full time employees
Changing trends in public enterprise:
Governments grew very rapidly in the 60’s and 70’s.
recently, growth has slowed down and the size of the corporate sector has decline in a
growing trend of privatization.
However, currently the sector has stabilized and even experienced a little growth.
The federal Scene:
in 1967 there were sixty seven parent crown corporations but by 2005 this number had
fallen to forty three.
the net effect has been to reduce the overall presence of most forms of crown
Federal crown corporations are major employers and their assets are impressive.
e.x. Canada post corporation has over 52,000 employees and has assets worth nearly 4.3
overall the number of employees and levels of assets have declined over time.
activities which federal crown corporations have been involved in has also changed over
after confederation, the federal government was mostly concerned with nation building
and so focused on transpiration undertakings
during ww2 the major theme of public policy changed from national unity to national
since the war ended, federal crown corporations have become more involved in the areas
of finance, insurance and real estate.
The provincial scene:
industrial development, liquor sales, housing, power generation, and research and
development have been among the more prominent fields in which crown corporations
have been established at the provincial level.
Saskatchewan has established a number of crown corporations to provide a more
Quebec is another province that relied heavily on crown corporations for economic
hydro Quebec is the most prominent of Quebec’s crown corporations
activities of provincial crown corporations has changed
previously power generation was most important
no, they have become involved for industrial and resource development areas Rationale for Crown corporations:
the federal government has used, and continues to use crown corporations to deliver
public policy wen the private sector, other levels of government, or feeral departments
and agencies cannot satisfy adequately the needs and interest of Canadians.
Nation building, community development, and externalities:
most common rationale for the creation of public enterprises in Canada has been the
need to make investments necessary for nation building and community.
such investments which have included the establishment of crown corporations in the
areas of telephone services and air and rail travel, amount to an attempt to provide for
what are called externalities.
externalities are both positive and negative
positive externalities: producers and consumers in the marketplace fail to take
into sufficient consideration that their exchange may have beneficial effects on
people outside the transaction.
in Canada’s history the private market has been unwilling to supply rail or air travel in
amounts necessary for the building of this country
response of government: create more crown corporations to make up for the deficiency.
negative externalities: two parties engaged in a market transaction may this time cause
harm to others, but the transaction continues nevertheless because the market provides no
way to force the two parties to pay for this cost
governments may affect market behavior indirectly by imposing a fine or some
National Goals and public goods:
external spillover effects of market transactions represent such a large proportion of the
total gains that no private sector actor is willing to supply a particular good or service
even if society benefits from it.
national security, public safety, and effective transportation are only a few of the public
goods that emerge in societies.
e.x. CBC was established to instill in Canadians a sense of their culture.