Another school of thought believes that dividends are adverse for the average shareholder as they attract taxes and cause fiscal disadvantages. Last but not the least the third group lauds large dividends as a positive signal to shareholders that all is well. So where does the modern shareholder value satisfaction stand in relation to dividend policies This is the one of the main issues which I will review in my paper below.
Secondly my research is concerned with whether corporate governance is a mechanism to enhance shareholder wealth The fear of manager stockholder conflicts as being a threat to Shareholder wealth has been expressed by many academics as the quote below demonstrates,
"The separation of ownership and control in a modern corporation often requires the delegation of significant decision-making authority to professional managers, which introduces the possibility that managers will have incentives to make decisions that benefit them at the expense of stockholders" (Byrd, Parrino and Pritsch, 1998).
As this quote argues from the thesis by Byrd, Parrino and Pritsch, 1998 where the authors have argued that the separation of ownership and control in a modern corporate form will require the transfer of this responsibility to professional managers and this will introduce a stockholder-manager conflict with in the corporate structure. It has even been suggested that like most small investors, they would be likely to depend on free-rider benefits from the efforts of larger shareholders, who may have better expertise in corporate monitoring (Byrd, Parrino, & Pritsch,1998). My paper will defend the Berles and Means thesis and try to assess the truth in the statement given in the question.
The modern corporate form finds itself dependant on the efficient allocation of resources by its agents of the funds which have been made available by the shareholders.The creation of new ventures and prudent investment becomes a focal aim of the established companies. This efficient allocation is dependant upon what the investors believe will be the returns as well as the trust that their company will be managed to maximize the investment and that the cash flows promised in exchange for the investment will effectively be returned.This trust will be established through a broad set of factors which will stem from the legal, institutional and regulatory environment that guarantees the investor protection.Accountability is the core concern that runs throughout the governance issues. Whether it is accountability of the management to the board, or the board to the shareholders, or even the employees to the employers, this is one issue that comes to fore whenever the subject is raised. Accountability does not confine itself to financial matters alone. It covers the whole idea of responsibilities placed on a person, a group or even a department and the evaluation thereof to find out how these responsibilities were carried out or delivered.
The third issue which I will deal briefly with is how corporate governance can enhance shareholder wealth and the role of the law