November 2, 2015

Owners and managers in state owned firms

Governance issues are at the center of current debates in public and private firms. Unfortunately, too often as a cosmetic perspective. The roots of the problem are left for another day. Let me give an example. Recently, a hospital selected its CEO by a unique procedure: asking the physicians about the right candidate (at least this is what has been published in the press).
Selecting the right leadership for a firm is the most relevant issue for any board of directors. However, in this case, they will have only one candidate coming from a proposal of professional employees of the firm. The board will confirm their option, for sure, otherwise it will boost a huge crisis.
The worst approach to selecting leadership is to confound participation with governance. In state owned firms, the governance belongs to elected politicians (of course they delegate to appropriate professionals selected for the board). The ownership is public, and citizens are represented through politicians. That's it.
In this unique case, politicians or their delegates have been supplanted by professional employees. This is a biased way to understand governance functions in state owned firms, and somebody should review it in depth before this approach is converted into a trend for other hospitals. Here you'll find the roadmap.