Comparative Corporate Governance and Financial Goals

Corporate governance is a commonly used phrase to describe a company’s control mechanisms to ensure management is operating according to

1. Discuss the nature of stock as an investment. Do most stockholders play large roles in the management of the firms in which they invest? Why or Why not?

In this essay I plan to show what consequences there are from a separation of ownership from control and what effects could occur as a result. I will be arguing whether managers are worth the cost of hiring, to the business as a whole, giving examples of problems that may arise in these types of situations and what impact they can cause. The separation of ownership in large firms is when the owners appoint paid managers to run their businesses, causing ownership to be divorced from control. Diseconomies of scale are the forces that cause larger firms to produce goods and services at increased per-unit costs.

6. The goal of shareholder wealth maximization model is to maximize the return to shareholders, and it is measured by the value of the firm’s common stock. It is also concerned with minimizing the risk to the shareholders’ bonuses. The model looks at the present value of all expected future cash flows (McGuigan, Moyer, & Harris, 2011, p.8).

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

The article is written to help readers gain a solid understanding the roles of corporate governance, both inside and outside the company. Its goal is simply to impart information, not make claims or arguments on its own. I will be judging it mainly on the sources gathered, numerous examples and explanations given and the overall effectiveness it possesses in effectively communicating its ideas.

To put it simply, in financial terms, to maximize shareholders wealth means to maximize purchasing power. Throughout the years, we have learned that markets are most efficient when the company is able to maximize at the current share price. Every company’s main goal should be to strive to maximize its value to every single one of their shareholders. Common stock represents the value of the market price, and it also gives the shareholder an idea of the different investment, financing, and dividend decisions made by that particular firm.

Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.

Nevertheless if companies operate in weak markets and fail to create growth and profit the concept of maximization of shareholder wealth is also an opportunity for self-regulation and security against threats for a company. This approach is in particular useful for safeguarding against difficulties arising from wrong or misguided leadership within a corporation. Shareholders of a company have the strongest interest in a company’s success because they often invest a lot of capital in the business and require revenues for their deposit (Moore, 2002). As a matter of fact, they become more

Corporate Governance: refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation and specifies the rules and procedures for making decisions in corporate.

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and social goals. Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

Answers to Concept Questions 1. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events occur, they may contradict the goal of maximizing the share price of the equity of the firm. Such organizations frequently pursue social or

These benefits, however, are available because the corporate structure separates ownership from control. Stockholders, the owners of a corporation, do not directly control the interests of a firm. They hire managers to act on their behalf, the classic principal-agent relationship.