Uncertainty 3 Risk And as the number of managerial levels increases so do the

Uncertainty 3 risk and as the number of managerial

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Uncertainty (3) Risk And as the number of managerial levels increases, so do the levels of agency costs associated with managerial decision making. So how do we ensure that managers act in firms interests?? Firm Structure & Control Topics in Firm Structure & Control Top Management Teams
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| faculty of economics and business K.J.McCarthy 2018 Corporate governance is the system by which businesses are controlled. The governance structure specifies the distribution of rights and responsibilities to the firms participants, such as the Board, the managers, and shareholders. It spells out the rules and procedures. It provides the structure through which the company objectives are set, and the means of attaining those objectives, and monitoring performance. Firm Structure & Control Topics in Firm Structure & Control Corporate Governance
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| faculty of economics and business K.J.McCarthy 2018 Firm Structure & Control Topics in Firm Structure & Control Corporate Governance The VOC was established in 1602. Unti 1609, it worked on a project finance basis. In 1609 it became a public company; its IPO raised 6.4million guilders. In 1610 the VOC paid dividends in nutmeg and pepper, and reinvested the profits it generated. Shareholders we pis*ed. There were allegations that the management were paying themselves too much, and were giving supply contracts to friends. Issac Le Maire was the worlds first activist shareholder. He calculated that the VOC was destroying shareholder value. In 1622, shareholders threatened to withdraw from the VOC unless…
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| faculty of economics and business K.J.McCarthy 2018 Firm Structure & Control Topics in Firm Structure & Control Corporate Governance Mangers provided: An overview of investment decisions The right to appoint managers Time limits for managerial positions The right to adjust the managers pay Limit the possibility of insider trading
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| faculty of economics and business K.J.McCarthy 2018 According to the literature on corporate governance, there are two ways to insure that managers act in the owners interests: 1. Incentive Alignment 2. Monitoring - Internal - External - Competition Based Firm Structure & Control Topics in Firm Structure & Control Corporate Governance
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| faculty of economics and business K.J.McCarthy 2018 There are a number real-world ways to align managerial actions: 1. Cash Bonuses Managers receive a cash bonus if and when they achieve specified goals. 2. Share Plans Managerial interests are aligned with a financial stake in the firm. 3. Stock Options Managers are given the right to buy shares at a specified moment in the future, for a fixed price. The value of the right increases with the performance of the firm. 4. Temporary Contracts Managerial employment contracts are for fixed time, and for a limited duration, and are renewable only if the required performance is attained. Firm Structure & Control Topics in Firm Structure & Control Corporate Governance: Incentive Alignment
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| faculty of economics and business K.J.McCarthy 2018 Incentive alignment, agency problems may be reduced, but can not be totally eliminated. Shareholders remain relative outsiders , with less information than the managerial insiders.
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  • Fall '14
  • Killian
  • Management, Firm Structure & Control, Structure & Control

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