For Amazon.com Inc, What internal governance mechanisms (ownership concentration, the board of directors, or executive compensation)...

For Amazon.com Inc, What internal governance mechanisms (ownership concentration, the board of directors, or executive compensation) would you propose to monitor managers' decision making?

How can it improve and maintain the company's performance?

corporate governance is the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.

Expert Solution

Question: For Amazon.com Inc, What internal governance mechanisms (ownership concentration, the board of directors, or executive compensation) would you propose to monitor managers' decision making?

Answer: Ownership is separated from business and owners hires managers to take decision on their behalf which should be in the best interest of the organizations, but sometimes there are agency problems when the conflict of interest is very prominent between the owner and managers. Unlike diffuse ownership, The concentrated ownership based on shareholding in the organization improves the monitoring and control over the manager's decision. In the US the owners use ownership concentration as an internal governance mechanism to forces the decision of managers and board in the best interest of shareholders.

Question: How can it improve and maintain the company's performance?

Answer: Ownership concentration reduced the agency problem and conflict of interest in the decision made by the managers. Ownership concentration gives better control over the decision made by managers and board which will be in the best interest of the shareholders and will be more sustainable in approach rather than short term gains to jack up the executive compensations. The decision made by managers will be more in favor of shareholders' interest and it will keep the organization close to its vision and mission. The corporation will be sustainable in the long term if the decisions are in line with the core value of the organization and meet the expectations of the shareholders.

keosha answered 2 years ago

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