Shareholders versus managers, Financial Management

Assignment Help:

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.


Related Discussions:- Shareholders versus managers

State the term- pass through certificates, State the term- Pass Through Cer...

State the term- Pass Through Certificates (PTCs) Pass through Certificates (PTCs) are debt securities which pass through income from debtors through intermediaries to investors

What is the tolerable error, What is the Tolerable error In addition t...

What is the Tolerable error In addition to looking at material differences individually the auditor must list all the differences (material or not) and consider in total wheth

Floating-rate securities that have adjustable quoted margin, Floaters ...

Floaters that can be classified under this head are: 1. Stepped Spread Floaters 2.  Extendible Reset Bonds

What are the objectives or goals of financial management, What are the Obje...

What are the Objectives or goals of Financial Management? Objectives of Financial Management: - It is the responsibility of the top management to lay down the objectives or goa

Coupon curve duration, Market price is used for determining the dura...

Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-bac

Default risk, Default risk is the risk that arises when the iss...

Default risk is the risk that arises when the issuer is not able to satisfy the terms and conditions of the obligation with respect to timely pa

What are the motives of holding cash, Q. What are the Motives of Holding Ca...

Q. What are the Motives of Holding Cash? Motives of Holding Cash: - In every business assets are kept for the reason that they generate profit. But cash is an asset which doesn

Operating cycle, discuss the applicability of operating cycle in poultry in...

discuss the applicability of operating cycle in poultry industry[consider broilers]

Calculation of variances, a) Distinguish among standard costing and budgeta...

a) Distinguish among standard costing and budgetary control.  (b)"Calculation of variances in standard costing is not an end in itself, but a means  to an end" Brief discussion

Delivery and credit risk, When a borrower uses repo market for fund f...

When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd