Key Takeaways

  • A quasi public corporation is a privately managed company that serves a public purpose and receives partial government backing.
  • These corporations often originate from public entities and maintain hybrid features of both private businesses and public institutions.
  • They can issue public stock but prioritize public service over profits.
  • Government funding may support startup costs, ongoing operations, or prevent insolvency.
  • Examples include Fannie Mae, Sallie Mae, COMSAT, and the U.S. Postal Service.
  • Employees work for the private corporation, not the government.
  • Quasi public corporations can influence economic development and public policy.
  • Accountability and transparency are often expected, though oversight varies.
  • A quasi public entity differs from a quasi corporation, which lacks formal incorporation but performs corporate functions.

Quasi Public Corporation

A quasi public corporation, sometimes referred to as a public service corporation, is a private corporation that is backed by a government agency that has a public requirement to provide certain services. Most quasi public corporations begin as government agencies, but thereafter branch off on their own, becoming a separate entity.

Such corporations, while quasi public, can still offer shares to the public and have investors involved to help gain capital for the business. Therefore, the quasi public corporation operates similar to an ordinary private corporation in that it will file the articles of incorporation and elect a board of directors. In turn, the board of directors will hire officers to oversee the daily operations of the business. The company can also issue shares of stock to the public on any major stock exchange.

But unlike a private corporation that operates primarily to benefit the shareholders, the board of directors in a quasi public corporation has a dual responsibility of carrying out the public purpose of the company and obtaining a profit for shareholders. While there is a dual responsibility, the main goal is to achieve the company’s public purpose over obtaining a profit for the shareholders of the corporation. Therefore, investors might be a bit hesitant about investing their money to help the corporation, as they might believe that their goals are not going to be met. However, investing in a quasi public corporation comes with very little risk due to the fact that, if the business isn’t making a profit, the company will be backed by one or more government agencies who will ensure that the corporation continues running and making a profit.

Similar to a public-purpose corporation, the quasi public corporation is initially established to benefit the public, but operates as a private company. The company is partially funded by the government to help expand or enhance the public purpose that the government agency wants to develop.

Some examples of a quasi public corporation include telecommunications, oil, gas, and electric lighting companies. Such entities have greater flexibility and fewer restrictions than ordinary private corporations because of the public policy purpose.

Differences Between Quasi Public and Quasi Corporations

It’s important to distinguish a quasi public corporation from a quasi corporation. A quasi corporation refers to an entity that has not been formally incorporated but is treated as a corporation under the law for specific purposes. For example, a county or school board may act as a quasi corporation, having limited rights to sue, be sued, and enter contracts.

In contrast, a quasi public corporation is a formally incorporated business that carries out a public function with government support. These entities operate under a legal corporate framework and often issue stock, whereas quasi corporations lack full corporate formality.

What Type of Money is Funded by the Government?

The government will generally fund the corporation for its continued existence while also providing funding if the company experiences persistent losses. Such losses might be due to lack of capital from investors, reduction in the price of shares, lack of sales on goods, or even lack of oversight by the board of directors and officers of the corporation.

Some private corporations might also become quasi public corporations after a government agency reaches out indicating that it wants to provide funding to the company and promote a public activity, i.e. scholarships to those unable to afford college. Since the government agency would ordinarily have additional steps to go through to donate funds to a private company, there will be less administrative duties on the part of both parties if the private corporation converts to a quasi public corporation.

Government Oversight and Accountability

While quasi public corporations operate independently, they are usually held to higher standards of accountability due to their public funding or mandates. This may include:

  • Regular audits or reports to government bodies
  • Transparency in financial and operational matters
  • Compliance with both private corporate laws and applicable public regulations

Government oversight helps ensure that these organizations do not deviate from their intended public mission while managing taxpayer resources responsibly.

Examples of Quasi Public Corporations

Some examples of quasi public corporations include the following:

  • Sallie Mae
  • Fannie Mae
  • Communications Satellite Corporation (“COMSAT”)
  • U.S. Postal Service

Sallie Mae was established to provide student loans to students. It was initially established as a government entity that serviced federal student loans. After some time, however, it converted to a quasi public corporation. Another example is Fannie Mae, also known as the Federal National Mortgage Association, which operates as an independent corporation under a congressional charter that provides help to those wishing to become homeowners. Fannie Mae encourages mortgage lending by purchasing mortgages that are insured by the Federal Housing Administration. COMSAT is another example; this company is backed by the U.S. Congress to enhance space development. The U.S. Postal Service is also a quasi-public corporation that operates as an independent agency of the U.S. federal government.

Advantages and Disadvantages of Quasi Public Corporations

Advantages:

  • Reduced Risk for Investors: Government backing minimizes the risk of failure.
  • Public Service Delivery: They help provide services that might not attract sufficient private investment.
  • Flexible Operations: Unlike public agencies, they can act more swiftly in business decisions.

Disadvantages:

  • Conflicting Objectives: Balancing public service with profitability can create tension.
  • Limited Accountability: Lack of direct government control may lead to mismanagement.
  • Market Distortion: Their government support might give them an unfair advantage over purely private competitors.

Quasi Public Corporation Employees

Employees of such corporations are not considered government employees but are rather private employees for the company. Even the board of directors and officers are considered employees of the corporation and not federal or state government employees.

Role in Economic and Public Policy

Quasi public corporations often play a significant role in shaping public policy and economic development. For instance, entities like Fannie Mae impact mortgage markets by buying and guaranteeing loans, which affects lending practices and housing availability nationwide. Similarly, quasi public utility companies may influence energy infrastructure investments or broadband expansion.

Their semi-public nature allows these corporations to innovate and deliver services at scale, which traditional government agencies may struggle to achieve due to regulatory or budgetary constraints.

Frequently Asked Questions

  1. What is the main purpose of a quasi public corporation?
    To fulfill a public need—such as education, housing, or infrastructure—while operating with the efficiency of a private company.
  2. How is a quasi public corporation different from a government agency?
    While it may be created or supported by the government, a quasi public corporation operates independently and is often structured like a private company.
  3. Can quasi public corporations make a profit?
    Yes, they can generate profits and issue shares, but their primary goal is to serve a public function.
  4. Are employees of quasi public corporations government workers?
    No, employees work for the corporation and are not considered public sector employees, even if the corporation is government-affiliated.
  5. Why would the government support a quasi public corporation instead of running a program directly?
    Using a quasi public model can reduce bureaucratic inefficiencies, attract private investment, and enable faster decision-making while still achieving public policy goals.

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