Conflict between Shareholders and the Management

There is the assumption that the managers and shareholders left on their own will each attempt to act in their own self interest. The managers are likely to pursue goals which do not maximize the shareholders wealth. The goals would only serve the interest of the managers and therefore conflict the shareholders’ goals. Conflicts of interest may, for instance arise from the following cases:

  • Managers awarding themselves hefty pay hikes
  • Managers taking expensive trips and holidays
  •  Managers arranging mergers and take – over for their benefits
  • Managers arrange very attractive retirement for themselves
  • Discriminatory employment practices
  • Luxurious lifestyles by managers fully paid by the business etc.
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