THEORIES OF FIRM
, Introduction
• Managerial theories conceive the firm as a ‘coalition’ (of managers, workers,
stockholders, suppliers, customers, tax collectors) whose members have
conflicting goals that must be reconciled if the firm is to survive.
• Clearly the most important member of the ‘coalition’ is top management,
because of its power in decision-making (goal-setting, basic decisions on
investment and expansion, promotions and appointments of ‘key’
personnel) and access to information.
• The basic characteristics of the ‘managerial business’ is the divorce of
ownership from management. The owners are the shareholders, whose
power lies in appointing the board of directors, which in turn appoints
the top management.
Owners
Board of directors Top management
Shareholders
, Introduction
• Managerial theories conceive the firm as a ‘coalition’ (of managers, workers,
stockholders, suppliers, customers, tax collectors) whose members have
conflicting goals that must be reconciled if the firm is to survive.
• Clearly the most important member of the ‘coalition’ is top management,
because of its power in decision-making (goal-setting, basic decisions on
investment and expansion, promotions and appointments of ‘key’
personnel) and access to information.
• The basic characteristics of the ‘managerial business’ is the divorce of
ownership from management. The owners are the shareholders, whose
power lies in appointing the board of directors, which in turn appoints
the top management.
Owners
Board of directors Top management
Shareholders
