Publication: State-Owned Enterprise Restructuring : Better Performance Through the Corporate Structure and Competition
Date
1995-10
ISSN
Published
1995-10
Author(s)
Muir, Russell
Soba, Joseph
Abstract
The legal structure of the modern
corporate form has four fundamental elements--separate
identity, limited liability for shareholders, centralized
management, and transferability of shares. These, together
with the dynamics of governance relationship between the
owners, the supervisory board, and the executives of the
firm, provide internal incentives for efficiency. However,
the legal form alone is not sufficient to ensure efficiency.
Certain external incentives must be in place for sustainable
efficiency gains. Corporate performance is influenced by
external pressures from competition in product, factor,
debt, and equity markets and by regulation. The interplay of
the internal and external incentives causes the managers to
act in accordance with the goals of efficiency and
profitability set by the owners. Also, it causes the modern
corporation to act with a clarity and singleness of purpose.
The absence of any of the internal or external incentives
can seriously undermine performance.
Citation
“Muir, Russell; Soba, Joseph. 1995. State-Owned Enterprise Restructuring : Better Performance Through the Corporate Structure and Competition. Viewpoint: Public Policy for the Private Sector; Note No. 57. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/f0f14b21-69b5-5dae-a299-cf6671c3994a License: CC BY 3.0 IGO.”
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