Question

Need assistance responding to this discussion post in personal opinion.

You’ll find that managers are also the shareholder or the owner of a company. In these cases, the shareholders interests line up with the goal of the firm. Technically, what benefits the company would also benefit the shareholder. You’ll also see that when the shareholder or owner is not playing the manager role, there’s a disconnect between both the shareholder and manager’s interest (Stout, 2002). The manager usually would make decisions based off of what will benefit him instead of the firm’s success. An example of this would be when a manager is spending the corporate credit card to buy non-business uses of an event. This lack of connect between the shareholder and manager’s interest is called agency problem. The unnecessary use of non-business purpose on the company’s credit card or expense can decrease the profitability of that firm.

Poor performing companies have been built to take extensive defense against takeovers. When a takeover defense is made, this action triggers the defenses. When a takeover takes places, management are usually first to exit their roles in the firm. What usually increases the agency problem is putting in place a takeover defense that are not related to managerial packages. For example, continuance of underperforming will not be resulting in job loss or security. Therefore, managers are more than likely to put themselves first in this type of companies. These managers in takeover defense firms would have to put in the extra work for lower pay and also avoid such actions that can be damaging to the company.

Answer 1