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Wilfred Brown, chairman of a large industry in Britain, who has written quite extensively on management and organization from the point of view of a practicing manager, has said:

"One of the features of each of these role systems that they possess very considerable power, vis-a-vis the company. The . . . systems are as follows: A group of shareholders, who elect directors to represent them, who in turn appoint the chief executive and set policies withinwhich he can operate the company."

"A group of customers--it may seem far-fetched to refer to them as a role system, but I think an analyst will show that it is justified. Individually they certainly possess considerable power vis-a-vis the company. They can, in fact, close it down if they dislike, say, its products, prices, delievery dates, by withdrawing their custom."

"The representative system (i.e., the emplyees" comprising everybody in the company . . . They possess great power and can in extremis close the company down by going on strike."

These forces, although quite different from one another, have an equality of status within an organization. All three are investors.

A shareholder invests money because he has money to invest, and seeks for the highest return with the lowest risk possible. The shareholder also wishes to see his investment grown over the years and will sometimes be prepared to receive a relatively low immediate return from the investment in the form of dividends, if he feels confident that it will be balanced by a fairly high growth. It may be true that a shareholder is able to remove his investment at will at will, but when this investment represents very large sums of money, it can often mean movement at a loss, and it is movement that would require a considerable amount of study and application.

February 26th, 2020 ~

Reference

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