Public Sector vs Public Limited Company: Difference and Comparison

Public sector organizations are government-owned and funded entities, serving public interests and delivering essential services. Public limited companies, on the other hand, are privately owned businesses with shares traded on the stock market, operating for profit and owned by shareholders. The primary distinction lies in ownership, funding, and the underlying purpose of serving public welfare versus generating profits.

Key Takeaways

1. The public sector comprises government-owned and operated organizations that provide goods and services for public benefit. In contrast, public limited companies are privately owned entities that issue shares to the public and are traded on stock exchanges.
2. Public sector organizations are funded by tax revenue and focus on healthcare, education, and infrastructure, whereas public limited companies seek to generate profits for their shareholders.
3. Public sector organizations’ management is government officials’ responsibility, whereas public limited companies are managed by a board of directors and executive officers who are accountable to shareholders.

Public Sector vs Public Limited Company

The difference between the Public sector and a Public Limited Company is that the government controls a Public sector company, and shareholders handle a public limited.

Both these terms are not clear to most people and lead to a mistake in choosing the right path for them.

The public sector has fewer shareholders, whereas Public Limited has more than fifty shareholders. However, there is a lot of difference between these two.

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Comparison Table

Feature	Public Sector	Public Limited Company
Ownership	Owned by the government	Owned by shareholders who purchase shares of stock
Primary focus	Providing public services	Maximizing profit for shareholders
Funding	Primarily funded by taxes and government grants	Funded by issuing shares of stock and borrowing money
Profit motive	Not driven by profit	Driven by profit
Transparency	Subject to public scrutiny and disclosure requirements	Less transparent, only required to disclose financial information to shareholders
Decision making	Decisions made by government officials based on public policy goals	Decisions made by company directors and executives based on shareholder interests
Accountability	Accountable to government and taxpayers	Accountable to shareholders
Flexibility	Less flexible, subject to government regulations and bureaucratic processes	More flexible, able to make decisions quickly and adapt to market changes
Examples	Public libraries, schools, hospitals, public transportation	Apple, Alphabet (Google), Microsoft, Amazon

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What is Public Sector Company?

Public sector companies are entities owned and operated by the government at various levels (central, state, or local). These organizations play a crucial role in delivering essential services, promoting economic development, and addressing public welfare.

Ownership and Governance

1. Government Ownership: Public sector companies are wholly or majority-owned by the government, ensuring that they are accountable to the public and aligned with national or regional objectives.
2. Board of Directors: Governance structures include a board of directors, appointed by the government, responsible for decision-making and strategic direction.

Funding and Capital

1. Government Funding: Public sector companies are financed through government budgets, grants, and subsidies, allowing them to focus on public service delivery rather than profit maximization.
2. Limited Autonomy: While they may generate revenue through their operations, their financial activities are subject to government regulations and oversight.

Purpose and Mission

1. Public Service Orientation: The primary purpose of public sector companies is to serve the public interest. This can include providing utilities, healthcare, education, and other essential services.
2. Social Responsibility: These companies prioritize social responsibility over profitability, aiming to address societal needs and bridge gaps in areas where the private sector might be less inclined to invest.

Examples and Sectors

1. Utility Companies: Public sector entities may manage utilities such as water supply, electricity, and sanitation to ensure widespread access and affordability.
2. Transportation: Government-owned transport companies play a key role in providing accessible and affordable transportation services to the public.

Challenges and Criticisms

1. Bureaucratic Challenges: Public sector companies may face challenges associated with bureaucracy, slow decision-making processes, and a lack of market-driven efficiency.
2. Political Influence: The influence of political decisions on these companies can sometimes impact their operational autonomy and long-term sustainability.

 

What is Public Limited Company?

A Public Limited Company (PLC) is a type of business organization that is registered under the company law and offers its shares to the general public. PLCs are commonly involved in various sectors, ranging from manufacturing and services to technology and finance.

Characteristics of Public Limited Companies:

1. Limited Liability:
   • Shareholders enjoy limited liability, meaning their personal assets are protected in case of company debts. Their liability is restricted to the amount invested in shares.
2. Share Capital:
   • PLCs issue shares to the public through an initial public offering (IPO). The company’s capital is divided into shares, and ownership is determined by the number of shares held.
3. Listing on Stock Exchange:
   • Public Limited Companies list their shares on stock exchanges, providing an avenue for buying and selling shares in the secondary market.
4. Regulatory Compliance:
   • PLCs are subject to strict regulatory compliance and disclosure requirements. They must adhere to financial reporting standards and disclose information to the public regularly.
5. Separation of Ownership and Management:
   • The ownership of a PLC is separated from its management. Shareholders elect a board of directors to make strategic decisions and appoint executives for day-to-day operations.
6. Minimum Capital Requirement:
   • PLCs have a minimum capital requirement to ensure financial stability and meet regulatory standards.
7. Transferability of Shares:
   • Shares in a PLC are freely transferable, allowing shareholders to sell or transfer their ownership to others without affecting the company’s continuity.
8. Public Ownership:
   • Public Limited Companies have a wide shareholder base, including institutional and retail investors, making them accountable to a diverse range of stakeholders.

Advantages of Public Limited Companies:

• Access to Capital:
  • PLCs have the ability to raise significant capital by issuing shares to the public, enabling them to fund expansion, research, and other business activities.
• Enhanced Credibility:
  • Public listing enhances the company’s credibility, signaling transparency and compliance with regulatory standards.
• Employee Benefits:
  • PLCs can offer stock options to employees, providing them with a sense of ownership and aligning their interests with the company’s success.

Disadvantages of Public Limited Companies:

• Costs and Regulatory Burden:
  • Compliance with regulatory standards and the costs associated with listing on stock exchanges can be substantial for PLCs.
• Loss of Control:
  • The original owners may experience a loss of control as decision-making authority is shared with a board of directors and widespread shareholders.
• Market Pressure:
  • Public companies are under pressure to meet short-term financial expectations, which may influence strategic decisions.

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Main Differences Between Public Sector and Public Limited Company

• Ownership:
  • Public Sector:
    • Owned and operated by the government or state.
  • Public Limited Company:
    • Owned by shareholders who can be members of the public and institutional investors.
• Objective:
  • Public Sector:
    • Primarily focused on serving public interests and providing essential services.
  • Public Limited Company:
    • Aims to generate profits for shareholders.
• Funding:
  • Public Sector:
    • Funded by government budgets, taxes, or subsidies.
  • Public Limited Company:
    • Raises capital by issuing shares to the public and may also take loans or utilize other financing methods.
• Decision-Making:
  • Public Sector:
    • Decision-making involves government officials and public representatives.
  • Public Limited Company:
    • Decisions are made by a board of directors elected by shareholders.
• Profit Distribution:
  • Public Sector:
    • Surpluses, if any, are reinvested in public services.
  • Public Limited Company:
    • Profits are distributed among shareholders in the form of dividends.
• Accountability:
  • Public Sector:
    • Accountable to the government and the public.
  • Public Limited Company:
    • Accountable to shareholders and regulatory authorities.
• Flexibility:
  • Public Sector:
    • Often subject to bureaucratic processes and government regulations.
  • Public Limited Company:
    • Can be more flexible and responsive to market dynamics.
• Risk and Reward:
  • Public Sector:
    • Lower risk, as it is backed by government support, but may have limitations in terms of financial rewards.
  • Public Limited Company:
    • Higher risk and potential for financial rewards, as it operates in a competitive market.
• Market Presence:
  • Public Sector:
    • Presence is in essential services like education, healthcare, and public infrastructure.
  • Public Limited Company:
    • Presence can be in a wide range of industries, driven by market demand.
• Share Trading:
  • Public Sector:
    • Shares are not traded on the stock market.
  • Public Limited Company:
    • Shares are publicly traded, allowing buying and selling on stock exchanges.

References

1. https://pubs.iied.org/pdfs/16017IIED.pdf
2. https://repub.eur.nl/pub/59129/KLIJN_et_al-1995-Public_Administration.pdf