Sample Solution

esponsibilities of its board and management and how their performance is monitored and evaluated” (ASX, 2014). Woolworths does specify the general roles of board and management. However, clear articulation of division of responsibility is lacking. Following Recommendation 1.1 would have given the board of directors a chance to create a path for the management to work upon.

Assess and Make Preliminary Decisions

These recommendations can be linked to agency theory. Rankin (2017) explains agency theory as a contractual relationship between the managers and the shareholders whereby the shareholders pass on the decision-making authority to the managers to manage their wealth. However, it is assumed that managers act on the basis of their interest which results in additional costs for the shareholders. One of the problems associated with owner-manager agency relationship is horizon problem (Rankin, 2017). Shareholders are usually interested in long-term growth of the company whereas managers look to solve issues with a short-term approach. In case of Masters, as mentioned by McConnell (2016), the board and the management was aiming at crippling Westfarmers by attacking its strongest venture, Bunnings. This was clearly a short-term approach towards dealing with an external threat. In addition to that, Woolworths board was not exactly working towards the shareholders’ interest by burning more than $3 billion of sh