Management

Abstract

A firm’s management has to co-ordinate the factors of production at its disposal. In the private-enterprise sector of the economy, staying in business should involve earning at least the opportunity-cost rate of return. A management that fails in this task brings take-over or bankruptcy near. Losses arising from business are borne by the owners. Managers may be owners, but owner-managers have now become rare. More frequently nowadays, managers are salaried employees. This has the result that the major decisions are taken by individuals whose personal fortunes are not at stake in the company concerned. They do have an interest, however, in the profits of the firm. Bankruptcy would spell loss of employment. Take-over would not necessarily do likewise, but it would at least involve some changes in management personnel. Success of the firm, on the other hand, means greater salary prospects in present or alternative employment. The widespread divorce of the managerial function from ownership thus makes the profit motive in decision-making more indirect. Nevertheless, it remains powerful.