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Pattern and Problem of Company Management

Having examined the roles assigned to the various organs of company management, we are well-equipped now to take at the actual working of company management and identify some of its important and sincerely implemented, things should be well on the track. But problems are bound to arise and malpractices bound to thrive if the practice deviates from the legal theory. This is the crux of the problem of corporate management surprisingly not only in India but even elsewhere in the world. We shall deal here with the following important aspects of company management: 1. 2. 3. 4. The problem of oligarchy in company management The effectiveness of the board of directors The decline and fall of the managing agency system The changing pattern of company management

The meetings are supposed to be conducted properly and matters are decided by voting after shareholders have been given proper opportunity to speak. Thus, in theory, company management gives the impression of a perfect democracy in which the general mass of shareholders wield the supreme authority in all matters concerning the management of the company. However, in practice, the management of companies exhibits some marked features of oligarchy. In actual practice, management is the exclusive monopoly of a few business leaders. These persons constitute an inner ring or a well-organised corporate group which is in a position to manipulate the working of the company to its own advantage without showing much regard for the shareholders interests. This is in the position not only in India but in partically all important capitalist countries of the world. In countries like the U.S.A. an the U.K., the real powers of management rest with the management consisting of a big industrialist and his associates and stooges. For more knowledge all the visitors can comment me on my article or mail.

Types of Problem

f you know the type of problem youre dealing with, you can handle it more effectively. One of the best skills you can master in life is problem solving. One of the keys to effective problem solving is knowing what kind of problem youre dealing with. For example, is this a unique problem, a pattern of a problem, or an exception? Knowing the type of problem helps you choose the most effective strategy. In The Essential Drucker: The Best of Sixty Years of Peter Druckers Essential Writings on Management (Collins Business Essentials) , Peter Drucker identifies four type of problems. Key Take Aways Heres my key take aways:

Know the four types of problems. The four types are: 1) truly generic. 2) truly unique.3) generic, but unique for the situation 4) new generic problem. First identify whether the problem is generic or unique. Misery loves company. Its great to know if the problem youre facing is a problem that others have faced. Chances are youre not alone. Treat the root cause, not the symptoms. To find the cause, you need to ask "Why?" You might need to ask "why?" multiple times. Leverage the experience of others. How have others solved the problem? Who can you learn from? Who else might share the problem? Use a principle-based approach to solving problems. This builds on the idea of leveraging the experience of others. Whats the underlying pattern or principle of the solution. For example, I know one of the underlying principles for influence is "rapport before influence." Knowing this, I adapt that principle to a variety of scenarios, whether its pitching a project or coaching a teammate.

4 Types of Problem According to Drucker, theres four types of problems: 1. Truly Generic (individual occurrence is a symptom; Two Different Kinds of Compromises) 2. Generic, but Unique for the individual institution 3. Truly exceptional, truly unique 4. Early manifestation of a new generic problem Problem Type #1 Truly generic Drucker writes:

There is first the truly generic, of which the individual occurrence is only a symptom. Most of the problems that come up in the course of the executives work are of this nature. Inventory decisions in a business, for instance, are not decisions. They are adaptations. The problem is generic. While many symptoms may vary, a lot of problems are actually generic if you look to the root cause. Problem Type #2 Generic, but Unique for the individual institution Drucker writes: Then there is the problem that, while a unique event for the individual institution, is actually generic. The company that receives an offer to merge from another, larger one will never receive such an offer again if it accepts. This is a nonrecurrent situation as far as the individual company, its board of directors, and its management are concerned. But it is, of course, a generic situation that occurs all the time. Sometimes a problem is generic, but unique in that you only face it once. Problem Type #3 Truly exceptional, truly unique Drucker writes: Next there is the truly exceptional, the truly unique event. The power failure that plunged into darkness the whole of northeastern North America from St. Lawrence River to Washington D.C., in November 1965, was according to the first explanations, a truly exceptional situation. Every now and then, a problem truly is unique. Problem Type #4 Early manifestation of a new generic problem Drucker writes: Truly unique events are rare, however. Whenever one appears, one has to ask, Is this a true exception or only the first manifestation of a new genus? And this, the early manifestation of a new generic problem, is the fourth and last category of events with which the decision process deals. Sometimes a new problem that at first seems unique, is really just the first instance of a new generic problem. Generic or Exception Drucker writes: The first questions the effective decision-maker asks are: Is this a generic situation or an exception? Is this something that underlies a great many occurrences? Or is the occurrence a unique event that needs to be dealt with as such? The generic always has to be answered through a rule, a principle.

Is the problem generic or an exception? Drucker recommends starting there. All Events But the Truly Unique Require a Generic Solution Drucker writes: All events but the truly unique require a generic solution. They require a rule, a policy, a principle. Once the right principle has been developed, all manifestations of the same generic situation can be handled pragmatically, that is, by adaption of the rule to the concrete circumstances of the case. Truly unique events, however, must be treated individually. One cannot develop rules for the exceptional. For generic problems, you can use generic solutions. Tailor the proven practices for your particular situation.

Oligarchy is a form of power structure in which power effectively rests with a small number of people. These people could be distinguished by royalty, wealth, family ties, corporate, or military control.

Causes of Oligarchy:
1. Lack of Unity among shareholders: Shareholders usually are represented as separate bodies rather than as an organized group, hence they rarely have any influence in the company decisions. Whereas the top management consisting of the industrialist family and friends are an organized group of people having consensus on each and every issue. As a result the top management can successfully pass all proposals and plans as per their wish since the general shareholders are ill-informed about an issue at hand and are not organized. 2. Company meeting styles: Most often the company meetings of shareholders are just an act of drama than the real case and hence always are ineffective. Shareholders rarely attend these meetings as they live in different parts of the country. And those who attend the meeting rarely go through the company accounts and statements or are incompetent to ask questions to the management. So the whole purpose of calling these meetings fail miserably. 3. Company elections: The whole system of electing a director is hand held by the top management or the family. Those who hold the majority of the shares have the power to elect their own

representatives, and large number of other shareholders, dont. The system of retiring by rotation for the directors also has its own loophole in the name of re-election. So the same director after retirement can control the affairs o fhte company after smoothly getting re-elected. Then there is the proxy voting system through which the top management is able to take votes of a majority of proxies.

Oligarchy in company management causes serious concern to all its shareholders and increase malpractices within the company. There is a tendency for management dictatorial and financial manipulation for personal gains and empire building. It also promotes nepotism and favoritism inside the company leading to future conflicts. More so oligarchy is the principal reasons for disparities of income and wealth in a country.

Board of Directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. The body sometimes has a different name, such as board of governors, board of managers, board of regents, board of trustees, board of visitors, or executive board. It is often simply referred to as "the board." A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. In an organization with voting members, e.g., a professional society, the board acts on behalf of, and is subordinate to, the organization's full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a non-stock corporation with no general voting membership, e.g., a university, the board is the supreme governing body of the institution; [1] its members are sometimes chosen by the board itself.[2][3] Typical duties of boards of directors include:[4][5]

governing the organization by establishing broad policies and objectives; selecting, appointing, supporting and reviewing the performance of the chief executive; ensuring the availability of adequate financial resources; approving annual budgets;

accounting to the stakeholders for the organization's performance. setting their own salaries and compensation

The legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates. For public corporations, these responsibilities are typically much more rigorous and complex than for those of other types. Typically the board chooses one of its members to be the chairman, who holds whatever title is specified in the bylaws. In some European Union and Asian countries, there are two separate boards, one executive board for the day-to-day business and one supervisory board for control purposes (elected by the shareholders). In these countries, the CEO (chief executive or managing director) presides over the executive board and the chairman presides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction between management by the executive board and governance by the supervisory board. This allows for clear lines of authority. The aim is to prevent a conflict of interest and too much power being concentrated in the hands of one person. There is a strong parallel here with the structure of government, which tends to separate the political cabinet from the management civil service. In the United States, the board of directors (elected by the shareholders) is often equivalent to the supervisory board, while the executive board may often be known as the executive committee (operating committee or executive council), composed of the CEO and their direct reports (other C-level officers, division/subsidiary heads).


The board has three broad areas of responsibility: planning and policy development; community and organizational development; and, fundraising and support development. The first, planning and policy development, includes determining the mission and vision that charts the future direction of the organization. This is usually accomplished through the board's leadership and participation in strategic planning. The first area covers policy development in response to major issues that are or will in the future have significant impact on the agency and the constituencies it serves. Also included is monitoring the performance of agency programs, products and services. The second area, community and organizational development, means broadening the organization's base of support in the community; interacting with the community to bring new issues, opportunities and community needs to the attention of organization; maintaining accountability to the public, funders, members, and clients. It also includes training and developing current and new leaders within the board and committees, and assuring that the same

development is occurring within the professional staff through the leadership of the Executive Director. The third area, fundraising and support development, includes giving personal time and money; developing donors, members, and supporters; leading and supporting fundraising campaigns and events as well as maintaining accountability to donors and funders. The three areas are closely linked to each other: If the Board is going to make decisions that reflect the true interests and needs of the organization's constituents, board members must be in tune with those constituents and the wider community of which they are apart. If the Board is expected to raise funds to support the programs and services of the organization, then board members must be involved in planning and decision-making in meaningful ways so as to feel in a strong sense of individual and collective ownership. If the organization is counting on board members to raise funds from the community, then board members need to maintain relationships with individuals and institutions in that community.