5.1 Forms of organisations 5.1.

1 Public sector
In a mixed economy the public sector delivers those goods and services that can not or should not be provided
by private sector companies or the business sector. The public sector provides services to the population either
free of charge or for a cost. The services provided may be on a national level, such as a national health service,
or on a local level, such as libraries. The public sector may be funded from local taxation, from central
government grants, or from a combination of the two.

Public services are funded by taxpayers and are administered by elected officials at national level (Members of
Parliament) or at local level (local councils or municipalities). See also Chapter 1, Section 2.8 for a discussion of
agency arrangements in the public sector.

5.1.2 Private sector

This comprises a large variety of organisations with the principal aim of, in simple terms, making a profit for the
benefit of individual owners or shareholders who provide the capital or funding for commercial activity.

5.1.3 Charities

Organisations set up for not-for-profit purposes, funded from donations.

5.1.4 Non-governmental organisations (NGOs) and quasi-autonomous non- governmental

organisations (QUANGOs)

Quangos are bodies set up by central government to carry out functions similar to government but with non-
elected executive members. The UK Cabinet Office's definition of a quango is:

'...a body which has a role in the processes of national government, but is not a government department, or part
of one, and which accordingly operates to a greater or lesser extent at arm's length from Ministers.'

The following table shows the main characteristics of these types of organisation.

Purposes and objectives

Ownership

Public service

Government

Profit Relief of poverty, research, etc

Partners/shareholders Donors

As defined by owners

Government

2: Approaches to corporate governance  Part A Governance and responsibility

Lobbying groups are those that come together with a common interest, with a view to influencing government
policy. They may come under criticism if they are seen to have sufficient power to influence policy in their
favour.
5.2 Levels of public sector organisations
   Sub-national -
A division of government below central level, for example a state, county or province
   National -
Central government, normally based in the capital city of a country
   Supranational -
Above individual national governments, for example the European Union

5.3 Public and private sector arrangements

   Strategic objectives

For private sector companies their reasons for existing are set out in the Memorandum and Articles of
Association or similar document. Strategic objectives are set by the board of directors and are
monitored against specific targets, such as increase in profit or market share.

In the public sector objectives are determined by the funding body in the first instance although
institutions may have a level of autonomy in how they operate and may be able to set local targets to
meet specific needs.

   Leadership

In the private sector leadership is provided by the board of directors and decisions are in some cases
(eg appointing the external auditor) ratified by a majority of shareholders. Leadership in the public
sector is founded on high standards of behaviour and leading by example.

In the UK leadership is one of the seven principles of public life as determined by the Nolan committee
in 1995, the other six being selflessness, integrity, objectivity, accountability, openness and honesty.

   Governance arrangements

Public sector organisations must have arrangements in place to demonstrate that public money is being
used appropriately and that specified objectives are being met in the provision of public services. Audit
or inspection regimes may be in place to report on success in achieving objectives.

5.4 Characteristics of public sector governance

   Nature of the state

The characteristics of a state vary considerably depending on whether is it a democracy, whether it has
a formal constitution and so on. The UK, for example, is a constitutional monarchy where the monarch
is the head of state (a largely ceremonial role) and the prime minister is the head of the government.
Most states require the following four 'organs of state' in order to function:

(a) Legislature–makesthelaws
(b) Judiciary–interpretsthelaw
(c) Executive–governmentdepartmentsheadedbycabinetministers (d) Secretariat–
theadministrationor'civilservice'.

   Nature of democratic control

In a democracy the government is answerable ultimately to the electorate. This may be at national or
local level.
Part A Governance and responsibility  2: Approaches to corporate governance

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Exam focus point

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 Policy implementation

At central government level policy implementation is the responsibility of the Ministers in charge of
government departments. In local government the Council conducts its affairs through officers who head the
various service departments in the local authority.

 Accountability and reporting

Public entities generally need to demonstrate that they have used public money for the purposes intended and
have obtained value for that money. One way of measuring this is to evaluate performance against the three 'Es':

Economy – obtaining inputs of the appropriate quality at the lowest price available.
Efficiency – delivering the service to the appropriate standard at minimum cost, time and effort. Effectiveness –
achieving the desired objectives as stated in the entity's performance plan.