Managerial Behavior

Even if the company is not taken over, the fear of takeover may prevent its co-operate board and managers from straying too far from profit maximising.

There are three internal and one external governance mechanisms used for owners to govern managers to ensure they comply with their responsibility to satisfy stakeholders and shareholder’s needs. First, ownership concentration is stated as the number of large-block shareholders and the total percentage of the shares they own (Hitt, Ireland, Hoskisson, 2017, p. 317). Second, the board of directors which are elected by the shareholders. Their primary duty is to act in the owner’s best interest and to monitor and control the businesses top-level managers (Hitt, Ireland, Hoskisson, 2017, p. 319). Third, is the

In this situation, the manager will try to increase profits as much as possible, meaning they may: • Select accounting methods that maximise profit instead of ones that better reflect the firm’s current position such as using a different depreciation method, accelerating revenue recognition or changing the level of depreciation. Try to manipulate accounting figures. Adopting a short-term focus instead of a long-term one. In this perspective, PAT is siding towards regulation. The Agency Costs of Equity One part of residual agency problems is the agency cost of equity. This is because managers’ shirking (they become less productive because they see no need to work for no extra pay) and conflicts with outside equity interests reduce the value of the firm. To minimise this, monitoring and bonding costs are required to implement measures to minimise its detrimental effect on the value of the firm. It must be noted that no firm will completely eliminate this as costs will increase exponentially as one tries to eradicate more and more. Thus, there is an optimal trade-off point between monitoring costs and agency costs. This is where the marginal monitoring and bonding cost equals the marginal shirk. The Agency Costs of Debt Much like the agency cost of equity, there is also one from debt. This is due to the fact that managers will always try to shift wealth from debt to equity holders. Managers have their stake in the firm’s equity and

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

Owners have to do things carefully especially in profit because if they will so much money it things which is not important for the company it may going to cost the company and also it will go down, so owners before they do things they have to make sure that will not going to affect the profit in a company.

This situation can lead to negative consequences for a business when its executives or management direct the organization to act in the best interest of themselves instead of the best interest of its owners or shareholders. Stockholders of the enterprise can keep this problem from arises by attempting to align the interest of management with that of themselves. This normally occurs through incentive pay, stock compensation, or other similar incentive packages that now cause the managers financial success to be tied to that of the company (Garcia, Rodriguez-Sanchez, & Fdez-Valdivia, 2015; Cui, Zhao, & Tang, 2007; Bruhl, 2003; Carols & Nicholas,

Back in 1985, a venture-capital firm Hambrecht & Quist invested in MiniScribe, and Mr. Wile was selected as the chairman. After that, he eliminated one fifth of MiniScribe’s work force and overhauled the company from top to bottom. In addition, he held his divisional managers accountable, which show us that Mr. Wile had unending control to the company. Although the Board later was restructured to include new members, they either worked for or were affiliated with Mr. Wile and the Hambrecht & Quist group. All of these phenomenon indicate a powerful CEO, which is harmful for a company’s healthy operation. Further, during his tenure, he usually managed MiniScribe from California, which gave him seldom chances to oversee real company operation. Besides, since he held several similar positions at the same time, he can’t devote all his energy to MiniScribe. Evidences in several forms have suggest that senior management was involved in fraudulent financial reporting activities, which indicates a failure of corporate governance.

The first section of this essay focuses on the possible causes of corporate failures including dominant CEO, poor strategy decision and the failure of internal control. Secondly, it discusses how the third edition of corporate governance principles and recommendations could be applied to prevent the causes of the failure. The 1st, 2nd, and 7th principles along with specific recommendations will be mentioned in this section. However, the context is concerned solely with the causes stemming from Dick Smith itself.

▪ Takeovers, competition, Government regulations, and the managerial labor market gives managers the incentive to perform better.

These tactics are built by management for self-protection reasons, being severe, (blocking takeovers) or soft tactics with no substantial impact on the offer price. However, empirical evidence shows that although manager’s defensive tactics may sometime rarely shareholders by increasing wealth, in general, these tactics do not have a positive impact in the share price of the target firm. According to DeAnglelo and Rice (1983) cited in Ruback (1987.p56-57), they found no evidence of share price reaction to adoption of corporate charters amendment when analyzing 53 firms using staggered boards as well as the effect of super majority provision.

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.

repurchases as takeover mechanisms or as defensive strategies. I make some reference to shareholder protection in the context of takeovers,

The over-investment by directors is not good for the stock market and it should be addressed properly to find a way out and safeguard interest of minority shareholders from the experience of other markets, writes M S Siddiqui……………….

Today 's business world shows a huge diversification in the shareholders of one company. In most countries, each investor only holds a very small fraction of issued shares by one corporation. This includes also the senior management.

In many firms separation of ownership and control is present as the shareholders who run the company often hardly ever get involved in the day to day running of the firm. However this