The Good, the Bad and the Ugly: Employee and Management Owned Firms

Margaret Thatcher started global trends during his tenure, where the Prime Minister was Downing Street. It is called: privatization. It consisted of transferring control of state-owned enterprises to the private sector. This was done by selling the company's stock. Sometimes the control itself was maintained by the state, but the economic gains arising from ownership of shares were partially sold to individuals. These economic gains consist of dividend income from stocks and an increase in value (due to participation in the private sector) known as capital gains.

However, the privatization process was neither completely homogeneous, nor uniform, neither transparent nor fair.

Stocks in some companies were sold to individuals or groups of individuals through direct negotiated sales. Hence, the “controlling interest” (nuclear) was sold, and apparently the premium paid by individual investors for control of the sold company was yielded to the state.

This privatization method was criticized as "villain capitalism." For some reason, it seemed that a carefully selected group of businessmen, all of their colleagues in the ruling political elite, would benefit most. They bought control shares at unrealistically low prices, critics said. To support their thesis, they pointed out the big difference between the price at which "cronies" bought the stock and later sold it to the public through the stock exchange. "Colleagues" shouted a foul. The price difference was due to privatization, better management and financial control. Perhaps. However, the recurrence of the same name in all major privatization deals still seemed suspiciously weird.

Then there was a second version. It is the sale of shares of a privatized company directly to the public. This was done using one of two methods.

Stock exchange on the stock exchange (cash method) or

The vouchers are universally distributed to all adult citizens of the country, allowing the country to share its wealth in a fair way. The voucher can be converted into a stock basket of the stipulated state-owned companies list (non-cash method).

However, a few (small) country groups have opted for completely different ways of privatization. Instead of being completely privatized, they decided to transform state-owned enterprises. Here we are providing you the new & Latest, breaking News Update for your regular basis activities.

Transformation, a place adopted by Macedonia, is the transfer of the control of a corporation and/or the economic benefits accruing to its shareholders to a group previously or still connected with the corporation.

In this single aspect, transformation is a major departure, not to mention a departure from classic privatization.

Ownership of the transformed company can be reverted to one or a combination of the following groups:

Employees of the company through a process called EBO (Employee BuyOut)
Company management in the form of business purchase or purchase (MBO / MBI)
Selected groups within the company. These groups can use the company's current and future assets as collateral to obtain the credits needed to purchase the company's stock. This is called leveraged buy because the company's own assets are leveraged (LBO) to purchase it.
Finally, a company's creditors can team up to agree to convert the company's debts to equity in the company through the Exchange of Shares for Liabilities (DES).

Occasionally, the state continues to maintain interest in privatized and transformed enterprises. This is especially true for nature monopolies, utilities, infrastructure and defense industries. All of the above is considered a strategic matter of national interest. Some countries, such as Russia and Israel, continue to own "golden stakes". This very specific type of security allows states to exercise decision-making power, veto power, or at least control over business matters that they deem important to security, financial viability or tradition. Israel's state-owned aircraft carrier, EI AI, makes planes inaccessible during the religiously holy Sabbath! Until very recently, the general (economic) wisdom of the West believed that transformation was (in the best case) aseptic movement. In the worst cases, it included deception and corruption. One was privatization and the other was privatization. However, some solid criticism also had some grounds. (1) The main ideological driving force of privatization was the activation of poor and degenerate state-owned enterprises. It is poorly managed, poorly financially controlled, and applies an inconsistent mix of business and non-business (political, social, geopolitical) considerations to the decision-making process. State-owned companies were considered anachronistic like dinosaurs. Many wanted to see it as extinct, like ancient reptiles. The infusion of private initiatives has earned the status of an ideological panacea for corporate anxiety in the public sector. But this is exactly what the Transformation version is missing. It didn't offer anything new. New management, new ideas (more likely to come from the same old team), and, above all, the direct consequences of favoring the old over the new-there is no new capital. In response, Transformation proponents replied that one new thing-individual capitalist incentives-far surpasses all existing factors. Incentive-driven initiatives will bring about the aftermath and in the most complete and realistic sense of the state-owned company will foretell change. Change, innovation and innovation are made immediately by the product of personal interest motives known to be the most powerful for humanity. (2) The transformation process blurred the division of labor, management and ownership. Employees acted as potential managers and co-owners in the newly transformed company. The concept itself of hierarchy, a clear chain of authority (downward) and responsibility (rise) has been violated. The ship must have one captain to avoid sinking. It is not in vain that the management and ownership functions are separated. Employees, managers and owners all have different views and opinions on all possible aspects of corporate governance and the proper conduct of business. Employees want to maximize their employment and the economic benefits that come with it. Managers and shareholders want to minimize this parameter and its impact on the enterprise. Managers want to maximize rewards. Employees and owners want to minimize or adjust their rewards for different reasons. This break in the "command chain", the proliferation and fog-like properties of the newly transformed entity are dysfunction, financial management errors, lack of clarity in vision and daily work, labor insecurity (unrealistic expectations of the workforce are not met). So, initially in the 1980s, the West preferred privatizing rather than transforming state-owned enterprises. The rapidly accumulating institution of economic research has clearly shown that privatization has worked miracles for privatized enterprises. In some cases, productivity has increased by 6 times. 60% to 80% of GNP in the West is now private, and an active trend to privatize the rest of the public sector continues. However, the same study revealed a less pleasant phenomenon. Only some entrepreneurs have benefited from privatization. Critics' paranoid allusions to this process have been fully proven. Something very depraved in the process of implementing the seemingly sound privatization idea. The public as a whole suffered economically. This led to the emergence of new social consciousness. It was provoked by the unacceptable social cost of capitalism. The rapid evolution of inequality in the distribution of income among more people, homeless, and social classes below the poverty line. However, this trend has been further strengthened by the apparent corruption of the privatization process. This new social consciousness converged with all the other important and prevalent trends of small business formation by small entrepreneurs. The latter functioned both as owners and employees of the company. There were 16 million owner-workers in the United States alone.

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Economic planners or politicians cannot ignore this figure. Employee-owned enterprises have become the majority in the service and high-tech sectors of the economy, the fastest growing and most profitable sector. As a result of these two trends, the West was moving away from discrimination between capital and labor power, away from the segregation of ownership and labor, away from privatization, and back again. This is a great revolution. The OECD (Organization of the World's Wealthy States) has established an institution that follows the trends of the world's poorest areas, politely called "Economy of Transition". This is CCET. Privatization continues at an uneven pace across the former Eastern Bloc, according to CCET's latest report. Almost done in some countries. Others have claimed to have done it, but they haven't really started. Some countries, such as Macedonia, have sold shares of state-owned enterprises (= enterprises with social capital) to managers and workers, but managers and workers have not yet paid most of these shares. It is by no means certain that they will be. If managers and workers fail to meet their obligations to pay the state, ownership of the company goes back to the state. This is paper privatization, a change in expectations. No one can seriously claim that the change is complete before the new owners of the enterprise respect their financial obligations to the state. All in all, worldwide privatization took place faster in small businesses. Selling a bigger company was a lot more difficult. Most of these giants consisted of numerous revenue centers and loss-generating business activities. Between the various operations there existed a solidarity of accounts and guarantees. The more profitable part of the company supported and subsidized the less competent part. This was not very attractive to investors. Official shame warms the heart. In parentheses-the proportion of privatized enterprises: Albania, Czech Republic, Estonia, Hungary, Lithuania, Poland and Slovakia all privatized 90% of small enterprises. In Russia and Latvia, this figure is 70%. The situation is even more blurry for large companies: Czech Republic (81%), Hungary, Estonia (75%), Lithuania (57%), Russia (55%), Latvia and Slovakia (46%), Mongolia (41%). , Poland (32%), Moldavia (27%), Romania (13%), Belarus and Bulgaria (11%), Georgia (2%). But what is hiding behind the figures? The Czech Republic is known for its mass transfer of wealth to a small number of people close to congestion and government circles. On the surface, the situation in Poland looks a little better. A universal voucher system has been established. People were able to deposit stock with 14 managed funds. The fund also bought some stocks and became some owners. They currently control 500 companies, which make up 5% of the country's GNP. Some of these funds are 50% foreign-owned, so the management and moral standards are Western. However, there are many rumors as well as rumors there. So, is privatization or transformation better? Perhaps the lesson is that we are all human. There is no way to be immune to human error and desire, corruption or allegations. Change tends to benefit more people. However, in the long run, it is inefficient, ruining the enterprises involved and causing permanent damage to both the economy and the worker owners. Would it be better to be the owner of a bankrupt company? Or is it better to work for a company you don't own? This is not an ideological or philosophical question. Ask the staff of the Pelagonija Construction Group. Privatization, on the other hand, is much more open to manipulation, but at least guarantees the continued existence of the enterprise and the continuous employment of workers. Sometimes in economic realities we have to give up justice (or what it looks like) to ensure the survival of the workers involved. Personally, I prefer privatization over transformation.

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