EOpriv: Response to Wheatcroft: Developing competent management

[Dan Bell <dbell@kent.edu>]

Dave,

Again I share your observation that if one can fix
a problem of poor management without privatizing, poor
management ceases to be a valid reason for privatizing.

I think that state companies and publicly held companies
(ie, traded on the stock market) often share the same
problem, which is that the owners are too far removed
from the business. If managers can get away with wasteful
practices without being held accountable, they will.
Some of this waste may be in forms that enrich them
personally.

Others, I believe, refer to this as the principal-agent
problem. Privatization is intended to align the interests
of the owners and the managers by making them one and the
same, or at least to create up-close (as Jeff Gates would
say) owners who are better able to keep an eye on their
managers.

Certainly a possible alternative to privatization would
be decentralization into local autonomous units with
economic incentives based on local performance, while
retaining state ownership.

Thanks again for your helpful comments. Could you expand
a little on what you mean by "Non executive Directors".
I was a little confused by the term.

Dan
--
Dan Bell
International Program Coordinator
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-0333 << New direct number!
(330) 672-4063 fax
dbell@kent.edu
http://www.kent.edu/oeoc/
http://cog.kent.edu