Ligning Stockholder and Management Interests

Discussion 1: Aligning Stockholder and Management Interests

Stockholders and managers want the same thing, dont 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 how to avoid such a situation.

Post by Day 3:

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.

REFERENCES:

Brigham, E., & Houston, J. (2013). Fundamentals of financial management (13th ed.). Mason, OH: Cengage Learning.

Chapter 1, An Overview of Financial Management(pp. 2a 24)
In this chapter, the authors provide an overview of what financial management is all about and how it is related to the overall business.

Chapter 5, Time Value of Money(pp. 137a 180)
In this chapter, the authors provide material on the time value of money and its foundational importance to stock and bond valuation and capital budgeting concepts.

Wise, S. (2013). The impact of financial literacy on new venture survival. International Journal of Business & Management, 8(23), 30a 39.
Retrieved from the Walden Library databases.

This article is an investigation into the impact of financial literacy on new venture survival. A model is proposed in which increased adoption of financial tools (e.g., financial statements and financial ratios) leads to increased frequency of financial statement generation, which, in turn, increases the likelihood of loan repayment and decreases the probability of venture failure.