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Government Corporation: Definition & Example

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Government corporations have the independence of a private businesses but they are owned, sponsored or acquired by the government. We’ll look at different examples in this lesson and show how they play a major part in our society.
Government Corporations in Society
Every weekend, John Anderson rides the train back home from Boston to New York City. He often listens to National Public Radio as the train speeds along the track. When he finally arrives home, he finds a stack of mail sitting at his desk.

In this short trip from Boston to New York, John Anderson has made contact, directly or indirectly, with four different government corporations. First, he rides Amtrak, a government-owned passenger train service. Second, he listens to National Public Radio (NPR), a government-owned public broadcaster. Third, he reads the mail from the United States Postal Service, a government-owned postal service. Fourth and finally, the house that he is living in is owned through a government-sponsored mortgage giant, Freddie Mac.

What this example illustrates above all is that government corporations are all around us – even if we don’t realize it.

Definition
A government corporation is a company that is owned by the government and operates with the same independence of a private business, except that the owner is the government. Government corporations usually are created in industries where a natural monopoly exists, it’s vital to the infrastructure of the country, valuable natural resources are at stake, or there is a general public benefit at stake.

There are three types of government corporations. In this section, we’ll consider all of the different types that exist.

Government-Sponsored Corporation
Do you owe student loans? Hopefully not, and you are using Study.com to avoid racking up these massive loans! But if you do owe loans, you might have to deal with a company called Sallie Mae. Sallie Mae is not owned by the government, but its student loans are subsidized by the government. For this reason, we say that it is a government-sponsored corporation.

Government-sponsored corporations are not owned by the government, but they are partially funded by the government, and as a result, can be regulated by the government. Another example of such a corporation is the Fannie Mae and Freddie Mac mortgage giants. Officially, these companies exist to make money for their investors. But Fannie Mae and Freddie Mac are able to offer subsidized loans to homeowners because the government insures these loans. So, although these corporations are technically owned by the investors, the government can regulate them because it subsidizes their loans

Government-Owned Corporations
Government-owned corporations are all around us. For example, need to take a train from New York to Washington, D.C.? You’ll probably ride Amtrak, a publicly-owned national passenger rail service that acts like a company. Need to send a letter to Los Angeles? You could use a expensive private carrier, or you could use the thrifty United States Postal Service, which is owned by the government but self-funds itself through postage.

 
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