The Ownership Structure of Corporations: Political Connections from the Resource Dependence Perspective – A Theorical Essay

Abstract

After the 90s, which heralded the era of privatization in Brazil, the government became a shareholder in various private companies. Government participation can interfere in the objectives, strategies and ultimately in the performance and survival of corporations. This paper aims to discuss this phenomenon and the importance of political connections in terms of ownership structure for an organization's survival. The objectives of governments as owners tend to conflict with those of other shareholders, because their goals tend to have more of a social and political element, which can lead to organizational deficiency in the performance of the company. One may come to believe that when a company has the government as a shareholder, its survival is ensured, as suggested by the theory of resource dependence, but this participation may in fact negatively affect the company's performance due to government objectives. This work proposes a way to mitigate the problem while ensuring the benefits of this connection with the government by reducing the stake of government in companies to minimum levels, which would reduce the risk of political interference.