Question

Identify the differences that might exist between the objectives of the company’s manager
with the board of directors or shareholders.

Answer 1

There are various difference of objectives of a company's director and shareholders and that can better be reflected through agency conflicts.

A. Shareholders are are inclined towards maximization of the value of the overall firm, whereas directors always want to report higher profits.

B.shareholders are inclined for capital appreciation in the long run whereas directors would be looking for profit maximization in the short run because that would help them secure their job

C. Shareholders would want the company to take less risk and constantly maximize its profit but the directors will always want to maximize the profit of the company through undertaking of risky projects.

D. directors will always be wanting a higher remuneration for their services to the company whereas the shareholders will always want a lower remuneration to directors because it would help them to cut the cost of the overall company.

E. Shareholders will always be wanting to get a higher amount of dividend where as director will always be wanting to reinvest the profits back into the business, as it will help in profit maximization