State owned enterprises and private corporations

Table of Content

2.1 Introduction

This chapter includes the reappraisal of old literatures that introduced general state of affairss of the two sorts of companies: state-owned endeavors and private corporations, and put peculiar accent on two typical companies: BP and CNPC. These formal research accomplishments formed the theory foundation for this survey and besides offered plentifulness of great thoughts and precise research waies.

2.2 State-Owned Enterprises

State-owned endeavors is a tool which can be used by authorities to affect and step in in the economic system, and one of a great figure of policies taken by authorities on behalf of the public involvement to work out outgrowth or possible jobs caused by the invalid market ( Yu and Huang, 2006 ) . Enterprises are a particular group of concern organisations served for economic ends. State-owned endeavors are a peculiar instance of concern organisations. Behind the state-owned endeavors, people can normally see two sorts of forces: one power of them is non-economic, political or ideological ; the other force is economic and useful. In the existent economic system, there is no a clear differentiation boundary between the two forces ( Ramanadham, V.V. , 1991 ) . Under the interaction of these two forces, state-owned endeavors become the peculiar concern groups of organisations that hold non merely non-economic aim but besides economic mark at the same clip.

This essay could be plagiarized. Get your custom essay
“Dirty Pretty Things” Acts of Desperation: The State of Being Desperate
128 writers

ready to help you now

Get original paper

Without paying upfront

On the cyberspace, there is a good figure of information about state-owned endeavors. To exemplify, the celebrated web site: WIKIPEDIA affords some interlingual renditions about state-owned endeavors. Harmonizing to its positions, the proper noun state-owned endeavor has no a rigorous definition, state-owned endeavors are groups of legal organisations that are set up by authoritiess on behalf of their involvement to fall in in commercial markets, supervisory functionaries of the sort of corporations are from the authorities and the character of state-owned endeavors cover from as a composing of authorities to a normal shareholder of stock companies ( Wikipedia, 2010 ) . Particularly, the website references a peculiar point that in the People ‘s Republic of China all commercial corporations were set up and possessed of by Chinese Governments after 1949 ( Wikipedia, 2010 ) .

In one study of Organization for Economic Cooperation and Development ( OECD ) , it claimed that state-owned endeavors play an of import function for GDP, employment and market capitalisation in some member provinces ( OECD, 2005 ) . At the same clip, state-owned endeavors are frequently highly popular in public-service corporations and substructure industries, for illustration, energy, conveyance and fiscal sector ( OECD, 2005 ) . And the public presentation of these Fieldss besides has indispensable influence on broad Scopess of the general populace and other parts of the commercial country ( OECD, 2005 ) . Taking the state of affairs of state-owned endeavors in China as illustration, in 1978, state-owned endeavors represented 77.63 % of entire industrial production, and this figure still was evidently important as on-third in 2009 ( OECD, 2009 ) . State-owned endeavors offered 35.8 % of industrial value-added and the portion of state-owned endeavors in GDP was 29.7 % in China in 2006 ( OECD, 2009 ) . In 1998 and in 2002, the figures of portion of state-owned endeavors in GDP in China were even severally every bit immense as 37.6 % and 34.5 % ( OECD, 2009 ) . In the Shanghai stock exchange in 2006 and 2007, there were eight state-owned endeavors occupied the top 10 companies based upon their market capitalisation value, and in 2007 50 % of the overall market capitalisation had been taken up by the eight state-owned endeavors ( OECD, 2009 ) .

There is a survey that researched the differences between state-owned endeavors and private endeavors in operating mechanism in France affording several material positions about state-owned endeavors. Although Gallic state-owned endeavors introduced private endeavors ‘ competition mechanism and direction system into their domestic and international markets competitions, state-owned endeavors have unusually different direction mechanisms and signifiers compared with private endeavors non merely in parts of preparation of development schemes and concern policies, but besides in facets of forces, finance, service orientation, production and direction and so on ( Dai, 1992 ) . Particularly in the basic direction purposes, state-owned endeavors have the cardinal difference with private endeavors. The direction of state-owned endeavors should non merely take into history the involvements of endeavors, but besides to the involvements of states, the primary intent of state-owned endeavors is to function for the general populace and the society, state-owned endeavors have twofold marks of both profitable aim and service purpose ( Dai, 1992 ) . There are a good figure of illustrations can O.K. these positions. In the research of Balanced Scorecard for State-Owned Enterprises by Johnson, Beiman and Thompson in 2007, they disclosed some mission statements of state-owned endeavors in China that can O.K. the descriptions of state-owned endeavors above, Beiman et Al ( 2007, p.45 ) illustrated:

“ aˆ? Pinging An Insurance ( HK )

a†’For clients: best service and dependable warrant

a†’For employees: calling development, devoted to the household and the endeavor

a†’For shareholders: stable returns, increased value

a†’For the society: create value for the society, and contribute to the development of the state

aˆ? Legend Holdings, Ltd.20

a†’For clients: To enrich our clients ‘ life and enable them to work more efficaciously and expeditiously by supplying them with the latest and best in IT merchandises and services

a†’For stockholders: To maximise our stockholders ‘ long-run returns and benefits

a†’For staff: To supply a stimulating and disputing work environment in which employees have chances for invention, every bit good as personal and professional promotion

a†’For the community: To lend responsibly to the development of the society. ” ( Beiman et al, 2007 )

The two cases explained the complexness of the state-owned endeavors ‘ marks.

Because the basic aim of state-owned endeavors is on behalf on the national involvement and to function for public calling, state-owned endeavors frequently have a twosome of development marks ( Dai, 1992 ) . These marks were normally dividend into two sorts: one of them is the marks which were set up for the endeavors themselves ; the other is the external aims that authorities required extra marks beyond the first sort of marks ( Dai, 1992 ) . Therefore, the aims of state-owned endeavors increased of course and these aims should be discussed and agreed by authoritiess before they formed contractions. It is really conventional that enterprises normally can non carry through those two sorts of marks at the same clip, but corporations must guarantee the aims required by the authorities because the state-owned endeavors ‘ basic undertaking is to function for public societal involvement ( Dai, 1992 ) . State-owned endeavors have many channels for their fiscal resources, such as company themselves ‘ financess, debts from fiscal markets and subsidy of the province ( Dai, 1992 ) . The directors of state-owned endeavors are appointed by the authorities. And the most of import criterion to take one individual as a director is to look into whether the political attitude of the individual is consist with the political base of the authorities ( Dai, 1992 ) . As a consequence, the executives of state-owned endeavors should function for the authorities ‘s political personal businesss and presume political duty. The labour costs of state-owned endeavors are normally low because the sort of costs is controlled by the province ; particularly the degree of the wage of the directors is prevailing low. But all the employees of state-owned endeavors fundamentally enjoy the intervention of governors ( Dai, 1992 ) .

Compared with general concern companies, the corporate societal duty of state-owned endeavors is more complex. As a particular concern organisational signifier, the corporate societal duty of state-owned endeavors is determined by the character of them. This is reflected concretely on the economic and non-economic marks of state-owned endeavors ( Yu and Huang, 2006 ) . The character of state-owned is the inaugural point to understand the system intension of state-owned endeavors, and besides is the origin grade to specify the economic and non-economic marks of state-owned endeavors ( Yu and Huang, 2006 ) . A state ‘s socio-economic system determined state-owned endeavors ‘ historic missions, being significances and societal committednesss should be taken. Consequently, the nature of state-owned endeavors is an built-in portion of the province finance. The corporate societal duty of state-owned endeavors is existed as an effectual agencies that the province participates in and intervene concern activities on behalf of the general public involvement ( Yu and Huang, 2006 ) . The corporate societal duty of state-owned endeavors pays more attending to realizations of non-economic aims, while the implements of economic intents are used to function for the realizations of non-economic aims ( Yu and Huang, 2006 ) . But there is a really unsafe state of affairs should do people to pay attending to. In the imperfect market economic system, pulled by the nature of capital to seek for net income, the drift of state-owned endeavors is so intense to prosecute the economic marks whereas give up the non-economic aims. If the nature and ends of state-owned endeavors are non clear plenty, their endeavors systems are unsound, and the commerce capacities are midway, the corporate societal duty of these sorts of state-owned endeavors will be merely the empty motto when they devote restricted societal resources that should be served for non-economic ends to the concern environment where corporations and market compete with each other with freedom ( Yu and Huang, 2006 ) .

2.2 Private corporations and the comparing between state-owned endeavors and private corporations

Harmonizing to the debut of WIKIPEDIA on its web site, a private corporation is the 1 that is owned by private investors, stockholders and proprietors. By and large, these private investors, stockholders and proprietors are corporate, but a private company may besides be owned by a individual person ( WEKIPEDIA, 2010 ) . Private corporations are different from province establishments, for illustration, stat-owned endeavors and authorities sections. Private corporations form the private sector of an economic system, and the aim of private corporations is different from other organisations, the most of import mark of private companies is merely to bring forth involvements for the private investors, stockholders and proprietors ( WEKIPEDIA, 2010 ) . Private concern can be classified into three types: Sole proprietary, Partnership and Corporation. The other categorization is the private concern can be divided into two subcategories: in private held companies and publically traded companies ( WEKIPEDIA, 2010 ) . At the same clip, the organisation signifiers of private corporations besides have many sorts, such as corporations, limited companies, limited liability companies, or other names, and these classs are classified by the location and concern model of private companies ( WEKIPEDIA, 2010 ) . Every class has its ain peculiar demands and limitations that can act upon the operation of private corporations. However, there are many unfavorable judgments of private corporations in many facets, particularly the corporate societal duty of private corporations.

Corporate societal duty is in a particular period the outlook the society looks frontward to of economic organisations about economic system, Torahs, moralss and charity ( Huang and Yu, 2006 ) . By and large talking, endeavors are the organisations whose basic aim is to prosecute economic net incomes. While, when the endeavor of course developed every bit big as possible and its behaviors are in tight dealingss with many facets of the society, the corporate societal duty of private corporations will be outstanding ( Huang and Yu, 2006 ) . In add-on, the most important criterion to gauge whether an organisation is legitimate or non, is that whether the activities of these organisation is consistent with ends and values of the society system where the organisation located in ( Huang and Yu, 2006 ) . The nature of private corporations is the organisation to prosecute of economic ends, the primary aim, even in most state of affairss the individual aim of private corporations is the economic aims, the corporate societal duty of private corporations is derived in the concern procedure to accomplish economic ends ( Huang and Yu, 2006 ) . Contentss of corporate societal duty of private corporations contain the chase of economic ends, economic ends are the chief contents of corporate societal duty of private companies, and any execution of corporate societal duty can non be accomplished without the execution of economic ends ( Huang and Yu, 2006 ) .

In the old research, there were a few of taking theoretical and empirical findings associating to comparison between state-owned endeavors and private corporations. In the first manus, harmonizing to the findings of Chang ( 2007, p.7 ) mentioned:

“ there is no clear theoretical instance either for or against SOEs. Pervasive informational dissymmetries and “ bounded reason ” ( Simon, 1983 ) necessitate “ hierarchal ” agreements ( i.e. , houses ) instead than “ contractual ” agreements ( i.e. , markets ) . Furthermore, the Sappington-Stiglitz Fundamental Privatization Theorem shows that the public presentation of private -sector houses is superior to that of SOEs merely under stringent and frequently unrealistic conditions. ” ( Chang, 2007 )

In the 2nd manus, the state of affairs is so obvious that there are the same affairs those state-owned endeavors and private corporations are confronting in the modern concern environment. Both state-owned endeavors and large-scale private corporations can be seen as intricate organisations that have assorted and overlapping beds of hierarchy, they all confront with complicated “ bureau jobs ” , or “ principal-agent jobs ” ( Chang, 2007 ) . And there are more and more people estimate that private corporations can be managed by the proprietors of them wondrous, so in their eyes the bureau jobs are non affairs for private corporations ( Chang, 2007 ) . In the 3rd manus, there is merely one executable solution for state-owned endeavors to cover with their problems even at the logical degree which is all-out denationalization and normally be advised by protagonists of today ‘s economic orthodoxy ( Chang, 2007 ) . Take the state-owned endeavor reform in Vietnam as illustration, from 1976 to 1998, state-owned endeavors in Vietnam reformed and acquired tremendous success ( Ngu, 2002 ) . In the procedure of the reform, the mean one-year entire factor productiveness in Vietnam increased from 3.05 % to 5.37 % ( Ngu, 2002 ) . Although the consequence of this reform is so first-class, the infirm operation and direction of stat-owned endeavors still encroach on the public involvement, and private corporations still are estimated by many concern experts to be more effectual and competitory than state-owned endeavors ( Ngu, 2002 ) .

A important figure of experts in economic sciences, enterprises leaders and policy-makers believed in a long period that private corporations can be operated more expeditiously than state-owned endeavors ( Sueyoshi, 1998 ) . Consequently, there are progressively figure of authoritiess reformed their state-owned endeavors to sectional or complete denationalizations ( Kang, 2009 ) . But there is a fact that everyone should detect about that the denationalizations of state-owned endeavors have disadvantages and lessons yet. A research on the denationalization procedure in UK concluded several points about the lessons and experiences. First, the UK reformed the state-owned endeavors in monopoly industries to denationalizations ( Yang, 2002 ) . However, denationalization has non basically changed the market belongings for companies to run, monopoly industries, particularly in the denationalization of public utilities companies, these sectors still have monopoly features, denationalization merely reassign monopoly features from state-owned endeavors to private corporations ( Yang, 2002 ) . Second, denationalization non merely can cut down the authorities intercession in concern, competition besides can coerce private endeavors to better their public presentations. However, every bit far as state-owned endeavors, they can obtain the fiscal or financial allowances from the authorities without fright of shuting down or bankruptcy, the market competition is non efficient every bit possible as adequate for them ( Yang, 2002 ) . Third, after the denationalization of endeavors, corporations give more consideration to the involvements of directors and stockholders and peculiar accent on corporate net incomes, which reinforces motive of corporation to prosecute short-run involvements, and ignores the long-run development of endeavors and technological advancement ( Yang, 2002 ) .

Cipher could deny that there was an progressively figure of private corporations participated in the execution of public marks in the last decennaries, particularly in developing states ( Crane and Valente, 2010 ) . Private corporations face more affairs that they can non cover with every bit easy as the operation of concern. Even there are so many basic homo demands which can non be fulfilled by the local authorities should be resolved by private corporations ( Crane and Valente, 2010 ) . Private companies even pay more attending to national security, the deficiency of instruction and infirmary installations, and so on ( Crane and Valente, 2010 ) .

2.3 Information about BP

2.4 Information about CNPC

2.5 Corporate societal duty?

2.6 Decision

Cite this page

State owned enterprises and private corporations. (2017, Jul 14). Retrieved from

Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront