Business Ownership, Management, and Corporate Governance

The Role of the Owner

The owner of an enterprise refers to the individual or group holding ownership of the company. They contribute capital to establish it, purchase machinery, and sometimes provide goods, property, or plant. They can also provide both money and necessary assets.

These necessary resources can be provided by a single person or several individuals.

The Function of Management

In small companies, the owner typically runs the business themselves. However, it is also possible for this task to be performed by another person contracted to manage operations on their behalf.

This reality introduces another crucial concept: management (or direction). This function is exercised by those with the authority to set goals, make timely decisions for their achievement, and direct and coordinate the work of others.

Therefore, managers make decisions concerning the company's activities, ranging from the most strategic to the most routine.

From Owner-Manager to Entrepreneur

When the owner also exercises the direction and management of the company, they are referred to as entrepreneurs.

While an owner who runs their own company logically aims to ensure maximum benefit or a satisfactory level of efficiency. However, in larger companies, the separation between ownership and control can give rise to conflicts of interest between owners and those who lead:

Addressing Conflicts: Corporate Governance

When one or more individuals manage the company, it is not always possible to ensure they fully defend the owners' interests. This situation led to the concept of corporate governance as a set of suitable mechanisms designed to ensure the fair and honest conduct of managers. The individuals responsible for supervising this work are integral to corporate governance.

Diverse Perspectives on the Entrepreneur

Approaches to Understanding the Entrepreneur

There are two main groups of contributions regarding the entrepreneur, originating from economic theory and business management:

• Contributions from Economic Theory: The role of the entrepreneur and the rationale for profit.
• Contributions from Management Studies: Defining the entrepreneur, their characteristics, and conditions that foster business success.

It should be noted that 18th-century classical economists often considered the capitalist and the entrepreneur to be the same person. Only Cantillon specifically drew attention to the word "entrepreneur" in its distinct meaning. In contrast, neoclassical economics, notably highlighted by Marshall, recognized the entrepreneur as a fourth factor of production (alongside land, labor, and capital).