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Finance & Accounting
Pages 4 (1004 words)
[Student’s Name] [Instructor’s Name] [Course title] [Date] Shareholders and management The relationship between the management and shareholders is the prominent concern of business ethicists. Most of the ethicist believes that management executives are indebt to provide its shareholders the duties of loyalty and truthfulness.
In order to overcome these disputes certain information is remained confidential to the shareholders. This paper briefs about the agency problems and discusses effects of conflicts on the shareholders. It further provides information about the shareholder management to minimize these conflicts. An “agency problem” may occur when the principle (shareholders) hires an agent (management) to perform business activities. This is because of the reason that the conflicts between the interests among between the management and shareholder (Clark and Marois). The main objective of the company’s management and stakeholders is to maximize its profits. Disputes among the managers and shareholders are created on the bases of their interests. Shareholders may object the amount of incentives that is being paid to managers (Clark and Marois). If the information regarding the incentives and pays to the management is disclosed to its shareholders, it may decrease the net profit margin of the company. In certain cases it is ethical for the management to hide the internal information from its shareholders, mostly decision making, investment decisions (Clark and Marois). This is because of the reason that the shareholders are not aware of the internal issues of the management; this may involve the moral hazards, employment issues, suppliers matter etc. ...
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