Question

How can a top management team lower the chances that key managers will pursue their own self-interests at the expense of stockholders? At the expense of the employees? At the expense of other key stakeholders? Without compromising the identity of an individual or group of individuals, share examples you have witnessed where this type of behavior occurred. What action did senior management take to curb the behavior? If no action was taken, in your opinion what could have senior management done?

Answer 1

In order to ensure that the key managers of business organisation do not prioritise their self interests at the expense of stockholders it is important to establish a mutual agency relationship with the organization where the agent (manager) has an implied duty to act solely in the interest of Principal (stockholders) so that the personal interests do not come in between of accomplishing business motives and stockholder's objectives. Moreover into-terms of stakeholders, to protect their interests the top management should incorporate an effective strategic control system which shall address the needs, desires and wants of key managers and assure them that their interests are being taken into consideration so that they do not resolve to use their selfish motives to accomplish them by exploiting the stakeholders such as customers. Once managers are assured that organization cares about them and their needs will be fulfilled, they will make efforts to fulfill the interests of stakeholders. As far as the employees are concerned, it would be best to offer incentives and perks to employees so that their intrinsic and extrinsic needs are met. This will ensure that conflict between employees and managers do not take place through separating their personal interests vand meeting them separately while retaining the group identity and coordination.

To retain the group identify the stress should be at the same time on coordination and synchronization of activities, policies and procedures which will enable the top management to establish interdependence between these parties to promote cooperation. This type of behavior occurred in my organization where a deal was signed by key managers because the deal would help it to enter overseas market and develop network, even when there was a risk of loosing all the funds of stockholders and also would have resulted in leaving the demand coming from loyal customers (stakeholder) unmet due to exports. The senior management failed to take any decision because the commitment to overseas part ers was already made and would have resulted in loss if goodwill if the agreement was terminated.

The senior management could have bound the managers into agency relationship by signing agency contract which would have made managers accountable for decisions resulting in losses for business or parties associated. If managers would have been provided an overseas training they would have not taken this step to accomplish their selfish motive for career orientation

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