What are crown corporations and why do they exist?
Crown corporations play a vital role in Canada, contributing to the development and maintenance of critical infrastructure and delivering essential public services. These government-owned entities are created to operate in the public interest, but they function with a degree of independence from direct political control.
Each Crown corporation is established either through a special Act of Parliament or by articles of incorporation under the Canada Business Corporations Act. These organizations vary widely in size and mandate, operating in sectors ranging from transportation and energy to finance and media. They are typically established to deliver services or goods where the market may be too small, the business activities do not generate significant profits, or business risks may be too great for a private enterprise. Currently, there are 43 federal parent Crown corporations, several of which own subsidiaries operating within Canada or abroad, such as the Canadian Pension Plan Investment Board.
Are all Crown corporations the same?
Not all Crown corporations are created equal. While each is governed by the legislation that established it, most are also subject to Section X of the Financial Administration Act (FAA) — the law that governs the financial administration of public property and Crown corporations.
The FAA classifies Crown corporations into three groups:
Schedule III, Part I: The majority fall under this category. These corporations may rely partially on government funding or loans to operate.
Schedule III, Part II: This group includes only three profit-oriented corporations that operate without government appropriations, but rather from revenue from selling goods and services.
Exempt corporations: Some entities, such as the Bank of Canada and CBC/Radio-Canada, are exempt from Section X of the FAA. These nine corporations are governed solely by their founding legislation.
In addition, several are classified as enterprise Crown corporations — government-owned businesses that generate revenue primarily from selling goods and services. This group includes some Part I organizations, all Part II corporations, and exempt entities like the Bank of Canada.
What’s the difference between Part I and Part II Crown corporations?
The main difference lies in the level of government oversight and reporting obligations.
Schedule III, Part I corporations must submit annual corporate plans, capital budgets, and operating budgets for parliamentary approval.
Schedule III, Part II corporations, by contrast, are required to submit only a corporate plan, capital budget, and dividend plan.
All Crown corporations are subject to annual audits. Their financial and operating results are disclosed through public annual reports, similar to private-sector firms. The Auditor General of Canada may be appointed to audit any Part I Crown corporation. Part II corporations, unless otherwise stipulated by their founding documents, may appoint an independent auditor.
How Are Crown corporations Held Accountable?
Crown corporations range in size from small firms operated by a handful of people to large organizations with tens of thousands of employees. Despite their diversity, most follow a consistent governance model.
Each corporation is overseen by a Board of Directors, which sets the strategic direction and appoints a Chief Executive Officer to manage day-to-day operations. Crown corporations also report to a designated federal minister, who is accountable to Parliament for their performance. This includes answering questions in the House of Commons and appearing before committees.
For example, Canada Post reports to the Minister of Public Services and Procurement, who ensures the corporation aligns with government priorities. During a labour dispute, the minister may encourage both parties to return to negotiations and must keep Parliament informed of any developments.
