Question

Give some examples of ways in which a manager's goals can differ from those of shareholders.

Answer 1

Manager goals can differ from those of shareholders as follows-

A. Managers will always want profit maximization at any cost but shareholder will not want profit Maximization when there will be very high risk in the market for undertaking projects.

B. Managers will be wanting higher compensation for themselves whereas shareholder will always want a lower compensation for the managers.

C. Managers will never want any merger and acquisition because it will lead to losing up of their job whereas, shareholder will want company to enter into all such mergers and acquisition that lead to increase in the shareholders value

D. Managers will be wanting to engage into insider trading for their own profits whereas shareholders would not want insider trading because it can lead to regulatory problems.

E. Managers are always exaggerating the performance of the company whereas shareholders always want the true figure and not the manipulated figures of the books of accounts.