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    Democratic governance severs the link between risk-bearin... — Carmelics
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    Challenges→Firms should be governed democratically

    Democratic governance severs the link between risk-bearing and decision-making authority, creating perverse incentive structures that harm firm performance and third parties alike.

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    Key Terms

    Decision-making authority(as used in organizational theory)
    The power and right to make choices that affect an organization or group, and have those choices carried out.
    Democratic governance(The type of government being discussed)
    A system of government where power rests with the people, either directly or through elected representatives who must answer to them.
    Firm performance(as used in business and economics)
    How well a company or business is doing, usually measured by profit, growth, efficiency, or other success metrics.
    Perverse incentive structures(as used in economics and organizational behavior)
    Systems of rewards and punishments that accidentally encourage people to do the wrong thing or make bad choices, opposite to what was intended.
    Risk-bearing

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    (as one of two ways to contribute value in Knight's theory)
    The act of accepting the possibility that something you invest in or decide to do might fail or lose money. It's the responsibility of dealing with uncertainty.

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    Democracy & Governance1 linked
    Firms should be governed democratically

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    Firms should be governed democratically

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