Theory: Corporate governance and liquidity management

For those in a hurry: Sufficient Cash position is essential for the continued existence of the company

The main tasks of management are setting goals, planning, deciding, implementing and controlling.
Real management decisions must not be delegated in the interest of the company.
Ensuring that sufficient Cash position is available is the entrepreneur's own responsibility and should not be delegated.
It is the owner's responsibility to appoint a person to secure Cash position - or to take on this responsibility themselves.
The authority to monitor Cash position can be delegated, but responsibility for its continued existence remains with the owner.

Corporate governance in the narrower sense

Gutenberg, Erich not Johannes, the inventor of letterpress printing, i.e. Erich Gutenberg is considered one of the fathers of modern business administration. In order to understand theoretically where decisions are generally located in the company, we look for this reason at the operational performance process and thus the factors of production freely according to Gutenberg:

Factors of production are divided into

Dispositive factors
Elementary factors

The task of the dispositive factor is to manage, plan, organise and monitor the operational process. The essence of this factor is to prepare and make decisions. So there we have it, the decisions. But decisions are always made everywhere, aren't they?

This factor can then be subdivided into the original factor and the derivative factor. The original factor represents the actual management of the enterprise, i.e. the management of the enterprise.

The decisions made in this area are referred to as leadership decisions and have far-reaching effects for the company. Characteristics of such "real leadership decisions" are, according to Gutenberg:

Genuine management decisions have a high degree of significance for the asset and earnings situation and thus for the continued existence of the company.
Real leadership decisions are made from within the whole of the company.
Real management decisions cannot be delegated or must not be delegated in the interest of the company.

Let's remember this sentence:
Real leadership decisions cannot be delegated or may not be delegated in the interest of the company.

At a later stage, Heinz Wissenbach added to these features:

Leadership decisions require "creative initiative" from every entrepreneur.
Leadership decisions are characterised by a special responsibility of the entrepreneurs for them.
Leadership decisions are decisions made under imperfect information.

Based on this characterisation, the following catalogue of leadership decisions can be drawn up (note: copy & paste for the general part of the job description of a managing director):

Determining corporate policy for the long term
Coordination of the large operational sub-areas
Elimination of faults in the ongoing operating process
Ensuring continued existence through sufficient Cash position
Business measures of exceptional operational significance as well as
Filling management positions in the company.

Thus, it can be stated that the main tasks of management are setting goals, planning, deciding, realising and controlling.

Ensuring that sufficient Cash position is available is therefore the entrepreneur's own responsibility and should not be delegated.

But does an entrepreneur really have to take care of it himself? In small companies, this question often does not arise due to a lack of employees. Otherwise, theory answers this question with extended company management.

Extended management

As a reminder, the dispositive factor can be further divided into the original factor, i.e. the actual management, and the derivative factor.

The derivative component is highly dependent on the management. Its decision-making authority with regard to planning, organisation and control is limited by the instructions of the management.

Of particular importance is that part of the operational process which deals with the case of fundamental questions. For this purpose, the term "corporate governance" will now be discussed in more detail.

Corporate governance in the broadest sense encompasses the areas of

institutional and
functional leadership.

Institutional management aims at the organisation and distribution of competences and specifies the totality of tasks and function holders. The distinction made in the organisational structure between top, middle and lower management thus regulates the scope of action of the individual decision-makers.

Ok, so what does this mean in the context of Cash position?
Let's assume a small, owner-managed company with several employees. The owner's task is to appoint a person to safeguard Cash position - or to take on this responsibility themselves. This is a common practice for companies with less than 10 employees.

The main task of functional leadership is to shape and control. Further study of these terms leads to a division of the functional level into the factual and the personal aspects.

In the person-related aspect, shaping and controlling refers to personnel management. This involves trying to motivate employees to strive for the goals set by the management.
Shaping and controlling in the objective sense is understood as setting goals, planning, organising and controlling.
The aspects of factual, functional management are also subsumed under the term corporate management in the narrower sense.

If the authority to monitor Cash position is delegated to an employee, this employee is responsible for the organization and controlling of Cash position. However, responsibility for the company's continued existence remains with the owner. This is particularly essential in the event of insolvency.

A term often used in the same context is "management". Corporate leadership and management are often equated, although the term management is also associated with the positive and negative characteristics of experimentation, dynamism, flexibility of thought, ruthlessness (especially in the area of personnel - "hire and ﬁre"), openness, etc. The term "management" is often used in the same context.

However, I have always liked another distinction between leadership and management in this context. Leadership means "motivating employees to achieve goals". Management is understood as "taking overall responsibility". Especially in small and medium-sized enterprises, these two terms are often combined in one or a few people.