The argument of whether the separation of capital ownership and control is an efficient form of organization has constantly been a controversial issue. The criticism whether the controllers’ act is in the best interest of the owners’ wills never end as long as hired managers operate management. As the number of public companies has been increasing over the course of this century, meanwhile the American style of contact based corporation has become more common as well, the so-called “agency problem” has been concerned and examined more frequently from wider aspects. The common theory agreed by literates is that they consider that hired managers do not have to act exactly as they promised to security holders to maximize wealth of the firm; instead, they will try to deviate by adding self-interest of their own (Macey 2008). Fama, however, argued that managers should behave rationally and responsibly to maximize the value of the firm under the consideration of potential outside wage rate (1980). Both arguments will be justified and examined further in the article; resources/evidence from some recent explorations will also be evaluated. The issue remains unsolved due to complicity of theories, complexity of measurements and other contradictory factors; however, shareholders may still find some options to tackle.
Many scholars are anxious about the problem raised from hiring managers. For example, Jonathan Macey explored the unsurprised disappointment act of top managers in his Corporate Governance as Promise (2008) that instead of pursing investors’ interest, corporate governance is about to deviate propensity of the firm from investors’ expectation by controlling capitals. His arguments based on the assumption of the legitimacy of...
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...e consistent interest theory. The options to solve this inherent problem are quite limited and every option suffers from different factors.
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This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees, customers, local community and the suppliers (Freeman 1984 pp. 409–421).
This report aims to evaluate how M&S applies the expectations and requirements of corporate governance based on their recent annual report, review of composition of...
This separation between ownership and managerial control in this instance can be problematic as the principal and the agents have different interests and goals. In a large publicly traded corporation such as NOL/APL, shareholders (principals) lack direct control when the CEOs (agents) make decisions t...
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