Who Owns the Firm? or in Other Words, the Firm Should Be Managed to Generate Value for Whom?

Who owns the firm? Or in other words, the firm should be managed to generate value for whom?

There are 2 basic rules that a firm should follow, irrespective of the size and the geography they operate into – DO NOT use unethical ways to play with your profits and second, treat your employees as an asset and not as an expense.

I agree here with Handy that modern day executives no longer take decisions to benefit consumers or their employees, but for their personal ambition and financial rewards. In 2009, a company in India, called Satyam, falsified its accounts by almost $1.5 billion to increase return for shareholders and increase returns to executive’s salaries. This scandal eventually affected life of 15,000 employees who lost their jobs.

Aligning my thoughts with those of Handy’s – a good business is the one that has the purpose to serve its community, which includes its employees, customers and environment, but modern day businesses have forgotten this to achieve short term gain and thus ignoring long term health of the organization.

Therefore, in my point of view, the firm is owned by the people who run it, not by the one who sit at the top and give directions. A thumb (CEO) alone cannot alone make a fist until it is supported by fingers (employees) to bind it.  There is no doubt that company should work towards achieving profitability but what they shouldn’t forget is rewarding the employees who contribute in the success and the same time, considering sustainability as a value for the firm, not as an additional cost.  Neglecting your workforce can sway them away from you, which means loosing your value-generating asset. The success should be measure not by a healthy income statement, but how satisfied and happy the community serving that company is, that includes employees as well as environment.