Firm Value and National Wealth

The wealth creation process of a nation cannot be seen separately from that taking place at the industry level. Hence, unless a nation is able to unleash the value creating potential of each organization, its over-all progress in this context will be significantly hampered. Incidentally for each firm to maximize its wealth creation potential, the need for private ownership of capital and well defined property rights in all sectors of an economy cannot be over-emphasized. Private sector business organizations will ensure that their managers are held accountable for the way they use the company assets, and the outcome thereof. When the firm level ownership is diffused (as in the cases of public or joint sector companies) and the majority ownership is predominantly with distant and impersonal state, there is no incentive for intra and inter-organizational cooperation for mutual benefit including wealth creation.

Since the wealth creation process of a nation is synonymous with that of its organizations, macro policies of governments of nation states must facilitate evolution and development of organizations that are focused, market driven, efficiency and change seeking, nimble-footed, and also capable of building and leveraging capabilities, all required to create wealth not only for their shareholders, but also for other stakeholders, including the government. For such value creation to take root within an organization, the external context must be right—market economy, healthy competition, transparent regulations, strong institutional frameworks in all public policy areas, clear intellectual and other property rights, freedom to access information and high ethical standards. If a nation is state is not able to put in place the required public policies in these areas and also no effort is made to simultaneously enhance managerial capabilities to create value, its wealth creation effort will always remain sub-optimal.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit, Line of Sight

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