Making Decisions Wexly is a large publicly owned corporation which you are the president. When making...

Making Decisions

Wexly is a large publicly owned corporation which you are the president. When making decisions, do you make them to maximize stockholders’ wealth or for your personal gains? What actions could stockholders take to make sure the interest of both parties is served? What can influence management’s actions?

Expert Solution

As a president of a public corporation it is my duty to serve the best interest of the shareholders. So, i cannot make decisions for my personal gains infact i have to take decisions for the best interest of the shareholders. In case any management takes decisions for personal gains at the expense of the shareholder interest, then appropriate action needs to be taken against the management . Working towards share price maximization and not only wealth maximization also helps me to maintain my position as a President of the company.

The shareholders can sue a company, where the managers are not working for their personal gains instead of working for the best interest of the shareholders. In case the shareholder sense that their interest are not being kept above the management's own interest, in that case they can organize meetings and also ask for a review of the quarterly statements and look into the financial performance of the company to make sure that the company is working towards maximization of the share price and not for personal gains. This can help minimize the issue with the usage of funds.

The management needs to be properly compensated in order to ensure that they act in the best interest of the shareholders. The system , where the managers are awarded bonuses for successfully achieving the goals. Providing bonuses to managers which is directly related to share price. In such a case, the shareholders will work towards maximization of share price which will result in best keeping of the shareholder interests.

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