what are the limitations of company organization
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. Difficulty of Formation:
Promotion of a company is not an easy task. A number of stages are involved in company promotion. The suitability of a particular type of business is to be decided first. A number of persons should be ready to associate for getting a company incorporated. A lot of legal formalities are required to be performed at the time of registration. The shares will have to be sold during the particular time. Promotion of a company is both expensive and riskly.
2. Separation of Ownership and Management:
The ownership and management of public company is in different hands. The owners i.e., shareholders play an insignificant role in the working of the company. On the other hand, control is in the hands of those who have no stakes in the company. The management may indulge in speculative business activities. There is no direct relationship between efforts and rewards. The profits of the company belong to shareholders and the Board of Directors are paid only a commission. The management does not take personal interest in the working of the company as is the case in partnership and sole-trade business.
3. Evils of Factory System:
The company form of organisation leads to large-scale production. The evils of factory system like insanitation, air pollution, congestion of cities are attributed to joint stock companies. Joint stock companies facilitate formation of business combinations which ultimately leads to the monopolistic control and exploitation of consumers.
4. Speculation in Shares:
The joint stock companies facilitate speculation in the shares at stock exchanges. The prices of shares depend upon both economic and non-economic factors. The speculators try to fluctuate the prices of shares according to their suitability. The stock exchanges will not help the growth of healthy investment when speculative activities are being carried on. The management of joint stock companies also sometimes encourage speculation in shares for their personal gains.
Promotion of a company is not an easy task. A number of stages are involved in company promotion. The suitability of a particular type of business is to be decided first. A number of persons should be ready to associate for getting a company incorporated. A lot of legal formalities are required to be performed at the time of registration. The shares will have to be sold during the particular time. Promotion of a company is both expensive and riskly.
2. Separation of Ownership and Management:
The ownership and management of public company is in different hands. The owners i.e., shareholders play an insignificant role in the working of the company. On the other hand, control is in the hands of those who have no stakes in the company. The management may indulge in speculative business activities. There is no direct relationship between efforts and rewards. The profits of the company belong to shareholders and the Board of Directors are paid only a commission. The management does not take personal interest in the working of the company as is the case in partnership and sole-trade business.
3. Evils of Factory System:
The company form of organisation leads to large-scale production. The evils of factory system like insanitation, air pollution, congestion of cities are attributed to joint stock companies. Joint stock companies facilitate formation of business combinations which ultimately leads to the monopolistic control and exploitation of consumers.
4. Speculation in Shares:
The joint stock companies facilitate speculation in the shares at stock exchanges. The prices of shares depend upon both economic and non-economic factors. The speculators try to fluctuate the prices of shares according to their suitability. The stock exchanges will not help the growth of healthy investment when speculative activities are being carried on. The management of joint stock companies also sometimes encourage speculation in shares for their personal gains.
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The company organization suffers from the following limitations:
Limitations:
Difficulty of Formation:
- A number of stages are involved in company formation.
- A number of persons have to associate for getting a company incorporated.
- At the time of registration, a lot of legal formalities are required to be performed.
- The shares will have to be sold during the particular time and accordingly.
Separation of Ownership and Management:
- The ownership and management of public company is in a number of hands, while control is in the hands of those who have no stakes in the company.
- There is no direct relationship between efforts and rewards.
Evils of Factory System:
- The evils of factory system like air pollution, in-sanitation, no resting area for pregnant women, and congestion of cities are attributed to the companies.
- Companies facilitate formation of business combinations which ultimately leads to the monopolistic control and in the end, it becomes a major reason of exploitation of consumers.
Lack of Secrecy:
- The management of companies remains in the hands of many persons.
- Everything is discussed in the meetings of Board of Directors.
- In this situation, secrecy can not be performed.
Delay in Decision-making:
- In company form of organization no single individual can make a policy decision.
- All important decisions are taken either by the Board of Directors or are referred to general house of the company.
- These decisions are often time taking too.
Concentration of Economic Power:
- Some persons become directors in many companies and try to formulate policies to promote their own interests.
- The shares of a number of companies are purchased to create subsidiary companies.
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