Corporate Mismanagement Should Not be Condoned

Business management is the resource which determines the success or failure of a business, and the quality of that management determines, unfailingly, the market.

Thursday, November 10, 2016

n>EDITORIAL

In
Costa Rica a state run bank and an agricultural cooperative have once again been rescued from insolvency and the mismanagement of their managers, using, as it would not have been possible any other way, money belonging to taxpayers.

The efficiency with which goods and services are produced does not depend on the will of governments but the skills of entrepreneurs who engage in the activity.

Therefore, if a company demands quality goods and services -and that's what usually happens- the survival of the businesses that have to produce them should be subject only to the criteria of efficiency identified by the operation of the free market, and never by the criteria of welfarism (or political expediency or favoritism).

While it is clear and universally accepted that there is a need for state assistance for people who have different levels of disadvantage compared to the whole of society, aiding companies that under conditions of free competition are not able to stay financially healthy causes market distortions that decrease the overall productivity of the economy, and constitutes a grave injustice for companies and entrepreneurs who are doing things right.

Inefficient enterprises must die eventually, and their workers should be assisted by the State through unemployment insurance -duly financed- and given training so they can get another job. 

But in an economy that is supposed to be liberal, the company and the failed entrepreneur should not receive any state assistance, because we insist and experience shows: when governments extend the concept of social assistance to inefficient businesses and entrepreneurs they are doing incalculable damage to the economy.

As much as some current philosophers may proclaim otherwise, business management is a resource which determines the success or failure of any business, and the quality of its management determines, unfailingly, the market.



More on this topic

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Nothing is more harmful to an economy than preventing the death of companies that have proven themselves to be inefficient or, as in the case of Bancrédito of Costa Rica, not essential or even needed.

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Helping the Inefficient Means Punishing Good Businesspeople

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In Costa Rica a law has been proposed that would benefit tourism businesses suffering from financial problems - caused by the 2008 crisis!! -, readjusting their debts and repurchasing and returning their lost assets.

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Beyond the dark aspects of the bill - among them that it is not known who the beneficiaries are - its purpose seems rude and unfair to entrepreneurs who managed to overcome the crisis of the last decade through proper management and undoubtedly a lot of sacrifice, and who today have healthy companies.

Another Business Model for Hondutel

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The Honduran state telecoms company is discussing a plan for mobile phones to be operated by a subsidiary.

The article in Laprensa.hn outlines that "In the past two years there have been discussions on a dozen economic models such as capitalization, leasing, manufacturing, joint ventures, public-private partnerships, franchising and outsourcing.

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