MINI CASE #1 (CORPORATE GOVERNANCE)

Question: Discuss the main differences between corporate governance in a major stock market company and governance in a state-owned organization such as the IPDB

 

Answer: There are following major differences between state-owned and a major stock market company.

  • There is bureaucratic leadership prevails in government-owned organization whereas in the major stock market company the hold of the government is nonbureaucratic and less structured.
  • The state exercises its ownership functions through a centralized ownership entity,      whereas the ownership functions are less centralized and authority is delegated to various steps at a stock market company.
  • The stock market companies are flat structured and work in small hierarchies whereas the hierarchies at state-owned organizations are higher and multi-layered.
  • The strict adherence to the code of conduct, rules, and regulations is ensured at state-owned organizations. The stock market companies have flexible structures of rules that allow its employees to command and change wherever needed in order to maximize share value.
  • Stock Market Company makes rules and procedures that are simple and help to accomplish a task without any extra effort and compliance with any code of conduct. However, a state-owned firm ensures an effective legal and regulatory framework. Thus making it compulsory for its employees to route through the centralized authority in order to make any decision or to enforce any kind of change.

Conclusion:

The motive behind running a state-owned organization and a stock market company separates both entities in terms of governance. The state-owned organizations work for the interest of the government. It often works to regulate the competition and market forces in the industry. Therefore the way it is operated is different than a stock market company. Stock Market Company eliminates the rules and procedures that slow down its profitability and put hindrance in increasing its share value.

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About the Author: Editorial Staff