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
Examine about the Risk-based auditing A risk based audit will be reviewing the risk management process and considering main risks of the organisation as a whole. Risk manage

Q. Objective of the business? Working capital is needed for the following purposes For the purpose of the raw material, components and spares To pay the Wages and the sal

Give two examples of types of companies that would be best able to handle high debt levels. Companies that manage local telephone service and those that manage natural gas deli

Which is lower for a given company:  the cost of debt or the cost of equity?  Explain.  Ignore taxes in your answer. The cost of debt is all the time less than the cost of equi

What is an annuity? An annuity is a sequence of equal cash flows, spaced consistently over time.

Do you guys provide Currency Options assignment help? I need writing a report on Currency Options and it is about 2000 words. Let me know. I need to buy your solution.

Q. Describe Working Capital Decision? Working Capital Decision: - It is anxious with the management of current assets. It is a significant function of financial management. Cur

Project Budgets and Reporting Systems: In many cases, where a project is initiated and a budget allocated, a separate account is created to ensure costs attributable to that pr

Under what circumstance would the U.S. dollar and the Canadian dollar be said to have achieved purchasing power parity? The U.S. dollar and the Canadian dollar possible conside

How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit.