Shareholders versus managers, Financial Management

Shareholders versus Managers

A Limited Liability company is possessed by the shareholders though in most of the cases is managed by a board of directors selected by the shareholders. This is since:

(i) There are many shareholders who cannot efficiently administer the firm all at the same time.

(ii) Shareholders might lack the skills needed to manage the firm.

(iii) Shareholders might lack the requisite time.

Conflict of interest generally occurs among managers and shareholders in the following manners:

(a) Managers might not work hard to maximize shareholders wealth when they perceive that they will not share in the profit of their labour.

(b) Managers might award themselves massive salaries and other profits more than what a shareholder would think reasonably.

(c) Managers might maximize free time time at the expenditure of working hard.

(d) Manager might undertake projects with various risks than what shareholders would think reasonable.

(e) Manager might undertake projects which enhance their image at the expenditure of profitability.

(f) Where management buyout is endangered. ‘Management buyout’ takes place where management of companies buy the shares not owned by them and hence make the company a private one.

Posted Date: 12/8/2012 6:53:33 AM | Location : United States







Related Discussions:- Shareholders versus managers, Assignment Help, Ask Question on Shareholders versus managers, Get Answer, Expert's Help, Shareholders versus managers Discussions

Write discussion on Shareholders versus managers
Your posts are moderated
Related Questions
Weighted Aggregates Index   In a weighted aggregates index, weights are assigned according to their significance and consequently the weighted index improves the accuracy of the

I need a report on the topic Cash Management Control. Can you please assist me for Cash Management Control report for about 2500 words?

The management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it would

Five Cs of Obtaining Credit The five crucial parts lenders examine previously issuing credit include: 1. Character.    This is a calculation of the borrower's integrit

Telephone service costs the Eggleston Motor Hotel $250 per week. The business pays its phone service bill on the fifteenth day of each month, but it prepares its financial statemen

Q. Graphic Presentation of Organisation of Finance Function? Graphic Presentation of Organisation of Finance Function: - The following chart describes the organization of the f

1. Discuss and describe in your own words the five Cs of credit analysis. 2. Why is it difficult for an entrepreneur to finance a startup with debt? What are the dangers of cre

Determine the example of Future Value of an Annuity An annual payment of 7000 $ is invested at 5% per annum compounded yearly. What will be the amount after 20 years? Solut

annual uasage of stock 100,000units carrying cost per unit of stock RM2 order cost RM250 question there is a constraint arising from the floor space of the

Q. Explain about Pay Back Method? Pay Back Method (PB) :- The payback process is the simplest method. This method computed the number of years required to pay back the original