Question

The question is, identify the shareholders' objectives and the management objectives and how these objectives align to achieve the company's goals.

Class: Commercial Finance

Answer 1

For a company to run in a healthy way and to prevent any conflict of interests between the management and the shareholders various policies are undertaken in order to weave all the objectives into a composite one which is beneficial for all the parties . As such the following are the key points

Shareholders objectives

No	Obejctives
1	Higher profits in shorter duration or Short term returns from the company
2	Investors demand higher longer term profit in a similar way
3	Higher Payout ratio from the company
4	Low risk in their investment profiles
5	Assured and capital protected returns from the company

As such it is not posiible for the management to fulfil all these demands of the investors in a holistic way

The Managements objectives are

No	Objectives
1	Long term growth of the company
2	Higher expansion in risk taking avenues for higher profitability
3	Higher retention ratio of the profites and profits to be reinvested for the growth of the dividends
4	Higher payouts for the top management of the companies
5	Work in the interest hat would be the best form managements point of view

As such these objectives may appear to be conflicting and they need to be aligned with the company goals for the growth of the company

Company Objectives

No	Objectives
1	Allow voting rights to the investors for joint decision making through voting by both the parties
2	Achieve stable and long term growth of the company
3	To increase the shareholders wealth generating capability
4	To adopt policies to act in the best interest for both the parties

Hence the joint company goals prevents the conflict of interest and helps in achieving the long term growth and profitability for both

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