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How do corporations ensure that manager's and stockholder's interest coincide?
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What are some actions that stockholders can can take to ensure that management's and stockholders' interest are aligned?
Threat of takeover.Managerial compensation: Managerial compensation is constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.Direct intervention by stock holders: Today, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. These large institutional stockholders have the ability to exert influence on managers and as a result the firms operations.Treat of Firing: If stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.Threat of takeover: If a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.
What are some actions that stockholders can take to ensure that management's and stockholders' interestes are aligned?
Threat of takeover.Managerial compensation: Managerial compensation is constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.Direct intervention by stock holders: Today, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. These large institutional stockholders have the ability to exert influence on managers and as a result the firms operations.Treat of Firing: If stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.Threat of takeover: If a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.
What are the forces that causes the managers to act in the interest of the shareholders?
There are many forces which will tend to create a convergence between the interests of stockholders and managers, and thus cause managers to be interested in maximizing a corporation's profits or value: a. Competitive pressures could lead to stock price declines for nonperforming company, and again result in take overs, proxy contest, etc. b. In many corporations, management remunerations are tied to the performance and managers frequently are awarded stock options which gain value as the price of shares rises. Thus, managers will have an interest in maximizing stockholder welfare. c. Corporate shares are not only owned by widely dispersed stockholders but by large institutional holders such as: banks, insurance companies, mutual funds, pension funds, etc. These organizations employ analysts who continually study stock performance. Nonperforming companies would be sold from these institutions' portfolios, and lead to decreased prices of these stocks. This could lead to the dismissal of present management.
What are some mechanisn that encourage manager to act in the best interests of stockholder?
Four primary mechanisms are used to motivate managers to act in stockholders' best interests:Managerial compensationDirect intervention by stockholdersThreat of firingThreat of takeovers1.Managerial CompensationManagerial compensation should be constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.This is typically done with an annual salary plus performance bonuses and company shares.Company shares are typically distributed to managers either as: Performance shares, where managers will receive a certain number shares based on the company's performance.Executive stock options, which allow the manager to purchase shares at a future date and price. With the use of stock options, managers are aligned closer to the interest of the stockholders as they themselves will be stockholders.2.Direct Intervention by StockholdersToday, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. As such, these large institutional stockholders have the ability to exert influence on mangers and, as a result, the firm's operations.3.Threat of FiringIf stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.4.Threat of TakeoversIf a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.
Why the threat of a takeover might make managers work toward the goals of stockholders?
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What are some of the forces that cause managers to act in the interest of shareholder?
There are many forces which will tend to create a convergence between the interests of stockholders and managers, and thus cause managers to be interested in maximizing a corporation's profits or value: a. Competitive pressures could lead to stock price declines for nonperforming company, and again result in take overs, proxy contest, etc. b. In many corporations, management remunerations are tied to the performance and managers frequently are awarded stock options which gain value as the price of shares rises. Thus, managers will have an interest in maximizing stockholder welfare. c. Corporate shares are not only owned by widely dispersed stockholders but by large institutional holders such as: banks, insurance companies, mutual funds, pension funds, etc. These organizations employ analysts who continually study stock performance. Nonperforming companies would be sold from these institutions' portfolios, and lead to decreased prices of these stocks. This could lead to the dismissal of present management.
Why were corporations better for large businesses than partnerships?
Corporations could continue to exist after managers died. Corporations could quickly raise money by selling shares of stock. Corporations can grow much faster.
Who do stockholders elect to act on their behalf?
The stockholders elect a board of directors to act on their behalf.The board hires managers to run the corporation on a daily basis. The stockholders become partial owners of the corporation.The corporation uses the money received from selling the stock to set up and run the business.
What are the problems encounter by multinational corporations?
Language barriers and culture shock are two of the problems multinational corporations encounter. Managers overcome this by hiring locals to work in the facilities.
Hourly wage for department managers?
The hourly wage for most department managers in retail is 10 to 12 dollars an hour. Department managers in large corporations may make 50,000 to 60,000 dollars a year or more.
What extent is in a marketing managers interest to restrict supply of product and maintain high prices?
Its in their interest as they love to steal from you
How can managers be encouraged to act in shareholders best interest?
Managers can be encouraged to act in their shareholders best interest by linking their pay to the stock price. When they are motivated by compensation then they will do things to make the share price increase.
