Sunday, November 23, 2014

When everyone in a company is an employee and nobody is the owner

In my opinion, it is important that at least several folks in the leadership of a company be the "owners" of the company. If this isn't the case, and if everyone in a company is an employee and no one is an owner, then there is little incentive left in the leadership to take the company forward. In fact, the senior executives - who are all paid a fixed salary, right up to the CEO - could actually start to leech the company for private gains.

This is probably what happens in government-owned companies such as ONGC or SAIL in India. Everyone is an employee, and the Indian government is the owner, so the executives are almost free to be as corrupt and inefficient as possible. This can explain, to some extent, the gap between the performance of private and government-owned companies.

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