OrionSayi Investment Banking Mumbai India

Ownership and Management

There is a general belief that owner-managers are more committed compared to
hired CEOs, drawing parallel to owner-driven vehicles being better maintained than
chauffeur driven. With technology and globalisation dominating business strategies,
debate on the question of ownership versus management intensifies. In India with the
law makers and regulators having added substantially to the concept of 'Promoter',
in different ways.

However in the absence of protection against genuine failures, this definition
of Promoter and the underlying and associated responsibilities have become
deterrents to entrepreneurship. The quarter to quarter pressure on performance
in listed companies has had its negative impact as mirrored in the declining
number of IPOs year after year in capitalist economies. Giving a piece of
ownership to hired CEOs has brought about precarious situations.

The owners' rights and management responsibilities remain bundled without

clarity in owner-managed companies. Business failures assume indelible stigma

in economies like India, with the premature demise/disappearance of specialist

development financialinstitutions and the seeming inability of full range

commercial banks to deal effectively with entrepreneurial failures.

Entrepreneur's dilemma is accentuated in the absence of effective

bankruptcy laws and defined exit options. Half hearted liberalisation has

also not served its purpose or helped the cause.

The classic questions remain the same:
● How to make the owner-manager think like a responsible CEO and how to
motivate the hired CEO to work like a committed, caring owner?
● What is the right balance of management compensation and ownership reward?
● How to address the underperformance in time to prevent failures?

The answers vary for enterprises in different age groups or stages of evolution.

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