Two Rights Separation Essay

4698 WordsMar 26, 200919 Pages
[Abstract] This paper introduces the practice of “Separation of Ownership from Managerial Authority”, which served as a vital transformation in the progress of realizing opening-up and reform policy by improving management and administration and revitalizing the positive competition in the market. With the trial and error taken by more and more industries, over the past 2 decades, the advantages of Separation of Ownership from Managerial Authority have been gradually manifested in the market economy of Chinese characteristic. [Key words] separation of ownership from managerial authority; reform; property right 1. Introduction 1.1. Theoretical Basis According to the views of political economics, ownership and managerial authority are two economic terminologies concerning the means of production. Over centuries, it has developed into a significant concept in the field of property right structure and corporation administration. While ownership generally means the residual claim of assets or residual bearing of risks; managerial authority is referred to as the actual possession, allocation and use rights of the economic resources. In more visualized language, separation of these two rights makes the situation possible in which a corporation belongs to a certain owner but is separately run and manipulated by a professional manager. Separation of Ownership from Managerial Authority derived from the modern western capitalist mode of production, developing along with the booming of large-scaled socialized production. The forerunner of modern enterprises is called “classical enterprises”, a form combined ownership and management into one stage with the advantage of lower deputy cost; however, such ownership can not achieve economies of scale as well as complete specialization and diversification of risk. As capitalist economy further developed, scientific

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