Question

Why less intervention of shareholders is one of reason entrepreneur has less conflict as compared to a manager and an agent of shareholders

(400 words)

Answer 1

Less intervention of shareholder is one of the reason enterpreneur has less conflict because every one has may different view on any matter if enterprise not take decision quickly or we can say on time then it may impact the result of enterprises. Although every shareholder participation is required for any decision but more intervention of shareholder can hamper the organisation work badly.

The conflicts between agent of shareholder and the managers of a business include the following:

• The more money that managers make in wages and benefits, the less stockholders see in bottom-line net income. Stockholders obviously want the best managers for the job, but they don’t want to pay any more than they have to. In many corporations, top-level managers, for all practical purposes, set their own salaries and compensation packages.

A public business corporation establishes a compensation committee consisting of outside directors that sets the salaries, incentive bonuses, and other forms of compensation of the top-level executives of the organization. An outside director is one who has no management position in the business and who, therefore, should be more objective and should not be beholden to the chief executive of the business.

This is good in theory, but it doesn’t work out that well in practice — mainly because the top-level executive of a large public business typically has the dominant voice in selecting the persons to serve on its board of directors. Being a director of a large public corporation is a prestigious position, to say nothing of the annual fees that are substantial at most corporations.

• The question of who should control the business — managers, who are hired for their competence and are intimately familiar with the business, or stockholders, who may have no experience relevant to running this business but whose money makes the business tick — can be tough to answer.

In ideal situations, the two sides respect each other’s contributions to the business and use this tension constructively. Of course, the real world is far from ideal, and in some companies, managers control the board of directors rather than the other way around.