Stockholders and Management Interests
Stockholders and managers want the same thing, don’t they? Theoretically, yes, but in reality, it does not always work that way. Too often, managers’ personal goals compete with shareholder wealth maximization. Sometimes, managers pay themselves excessive salaries or bonuses that are at odds with the idea of shareholder wealth maximization. How many times have you seen in the news examples of CEO excesses or outlandish spending on events or things that definitely do not help the overall goal of stockholder wealth maximization?
To prepare for this Discussion, think about a time in your professional experience when a decision was made that seemed to benefit a specific manager or small group of managers and not the overall corporation. If you do not have professional experience directly related to this topic, research a situation in the news where this theme is demonstrated. Consider the outcomes of such an imbalance between manager and stockholder interests and research on how to avoid such a situation.
Describe the situation from either your professional experience or your research.
Explain two or more motivational tools that can aid in aligning stockholder and management interests.
Explain how your selected tools are effective in resolving potential conflicts among managers and stockholders.
Support your discussion with appropriate academically reviewed articles. Use APA format throughout.
Part 2: Application of Concepts/Time Value of Money
Review the video links below. Based on the materials presented in these videos, discuss how you will use the time value of money concepts in managerial decision-making. Be specific and give examples based on your experience or research.
Sample Solution
Stockholders and Management Interests
It has become fashionable to blame the pursuit of shareholder value for the ills besetting corporate America: managers and investors obsessed with next quarter`s results, failure to invest in long-term growth, and even the accounting scandals that have grabbed headlines. When executives destroy the value they are supposed to be creating, they almost always claim that stock market pressure made them do it. Stockholders and managers have their own goals for a company. In an ideal situation, managers` goals will be the same as the goals set forward by the stockholders via the board of directors. Unfortunately, this is not always the case. Useful motivational tools that will aid in aligning stockholders` and management`s interests include: reasonable compensation packages; direct intervention by shareholders, including firing managers who don’t perform well, and; the threat of takeover.
