Thumbs up for owner-founder oversight: and a skeptical thumbs down for private equity.
Are there any potential downsides to being private or public with a committed founder or owner in control as opposed to being public with a differentiated and anonymous owner structure? I cannot think of very many.
I see many advantages of strong owner control. In such companies, it's more likely that the business will have a longer-term perspective and be willing to take more risks. Both these factors are likely to bring more fundamental change or provide greater opportunities to move ahead of the competition.
The existence of a present, dedicated, and knowledgeable founder and owner is also a considerable advantage. The founder is crucial to establishing the strong heritage and values that give the company a soul by which loyalty and motivation among the employees can more easily be created. No employed CEO will stay long enough to be able to take on that role.
With their competence and knowledge, owners can both challenge management and restrain the company from excesses in perks and compensation. I also think the likelihood of being a "good company" is greater with a strong owner in charge. Profits can be deployed to good causes without much debate. In my opinion, private companies or publicly owned companies with one committed controlling shareholder have better prerequisites in place to create competitiveness, a dedicated workforce, and good citizenship than do public companies with a diluted ownership structure. This is, of course, predicated on the founder or owner having the wisdom, dedication, knowledge, leadership, and values required.
There is, however, one form of private ownership that in my opinion has difficulties living up to the criteria above: private equity. That is for the simple reason that private equity companies have two fundamental objectives that do not align with my thinking of success: One is to exit within a short time frame (five to seven years). Another is to satisfy only one stakeholder, the owners. Therefore, I believe it is very difficult for private-equity-owned companies to take necessary risks, take a long-term view, develop a strong heritage and values--the soul of the company--and contribute to a better society encompassing many different stakeholders.
Anders Dahlvig had a 26-year career with Ikea. He started with the Swedish furniture retailer in 1984 and worked his way up from store manager to president, serving in that leadership role from 1999 to 2009, a period during which the global giant averaged 11% yearly sales growth and hired more than 70,000 new employees. This article is excerpted with permission from his new book, The Ikea Edge: Building Global Growth and Social Good at the Worlds Most Iconic Home Store, copyright [c]2012 by Studentlitterater AB and published by McGraw-Hill (www.mhprofessional.com).
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|Publication:||Directors & Boards|
|Date:||Jan 1, 2012|
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