country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Shareholder Value And Employee Interests

tag 0 Download9 Pages / 2,085 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss About The Shareholder Value And Employee Interests?

 

Answer:

Introduction

A company is a distinct legal individual, separate from its owners, known as shareholders or members and have similar rights as a natural person. A company has the ability to sue and be sued, or incur debt. The company is an artificial person having perpetual succession, common seal, limited liability and ability to transfer its capital into small pieces known as shares. The person, who owns the share of a public or private company, is known as a shareholder. The individual holding shares of a corporation are its owners, but the corporation is managed by company officers known as directors. The directors are appointed by the shareholders or other board of directors, and they represent the company’s shareholders.

The corporate governance is a wide-ranging term, including various policies, directions, guidelines, and procedure followed by company’s directors in order to control and manage a company. Effective corporate governance increases the performance of the organisation and balances various interests of stakeholder in the company. The stakeholders of a company include consumers, stockholders, directors, managers, investors, and government.

 

Stakeholders

The individual having an interest in a company or the person whose rights get affected by the activities of the company is called stakeholder. There two type of stakeholders: Internet and External. Internal stakeholders are entities who work as internal part of the organisation, including employees, managers, investors, and board of directors. External stakeholders are not part of internal management but still get affected by the performance of the company, including consumers, sellers, shareholders, government, community, and creditors (Golob 2007).

The employees are the individuals who hired by the corporation for a specific job. Many companies provide shares to their employees under Employees Stock Ownership Plan or ESOP, in order to increase their role in the organisation. The owners of a corporation appoint the directors as the officers of the company. The officers represent the interest of various stakeholders, supervise the activities of a corporation and make decisions for key matters of the corporation. The managers of a company control the daily operation of an organisation and supervise various aspects of a company, to achieve its goals (Damian 2002).

 The consumers are the prime focus of a company. A company works to satisfy the needs or supply the products, to its consumers. The consumers are the most valuable asset of the organisation. The supplies provide the raw material for production and provide credit to the corporation. The government imply various taxes on the organisation and protect the public interest, in the corporation. The shareholder owns the shares of a company, they benefit from growth in the value of company’s stock (Fletcher 2003).

Importance of Shareholders

Shareholders invest their capital in the company by buying its share, as such; they are the part-owner of the corporation. Shareholders did not get involved in daily activities of business, instead, they have voting rights to appoint the board of directors. Shareholders have the voting power, which they used to make decisions for the major issues of the company (Farrar 2008).

The shareholders are important for the company because they help the company in raising funds for its operations. The shareholders help finance the company’s activities and in return, they become the owner of the organisation. The investment contributed by shareholder used in performing activities of the corporation and achieves its objectives (Sharma 2004).

The shareholder has both direct and indirect part in the activities of an organisation. The directors or the officers of a company are appointed by the votes of shareholders. The elected directors appoint other key managerial personnel of the company to manage the daily activities of the organisation. The indirect role of the shareholder is related to stock market. The companies require earning profits, in order to attract the investors. There is a constant pressure under company’s management to raise their profit.

Every public company generally has proper corporate governance guidelines, which require companies to disclose their financial statements in meeting to their owners. The officers and directors have a duty to respond to the shareholders and not to the managers. A public company’s board of director provide appropriate and whole disclosure to its owners in their meeting. The owners discuss and analyse the operation and growth of the company and take decision for major issues of the corporation.

The control of a company is determined by its shareholders. A higher number of shareholders increase the risk of a hostile takeover in a company, but if the shareholders are satisfied with the management and growth of the company, they can stop such attempts. The shareholders could accept the offer of merger or acquisition with another corporation if they are satisfied with the offer price (Christensen 2010).

The shareholders of a company face various risks while investing in a corporation. The value of share changes rapidly on the stock exchange. Various market factors or government policies could adversely affect the stock value of a company in the market. At the time of winding-up, the assets of a company get sold and proceed distributed among different stakeholders, shareholders get paid last (Nguyen 2002).

 

Evidence of Shareholders Primacy

Many directors worldwide held the opinion that directors and officers have a legal responsibility towards company’s owners and it is their obligation to place their interest above all other stakeholders. But this is just an ideology, not the actual law. In shareholders primacy approach, the company’s sole motive is to increase the profits for shareholders. Under this approach, usually, the employees of corporation suffer due to job losses or work pressure (Grossman 2005).

According to various market experts, shareholder primacy affects the interest of other stakeholders of the company. The approach “Motive of a company is only to gain profit” has been changed with the introduction of Corporate Social responsibilities or CSR. Now the motive of the company is not limited to increase profits, but to also increase the quality of life for employees and society.

The study conducted upon 4000 company directors in June 2006, for finding the evidence of shareholders primacy. The survey was focused on finding evidence for whether directors prioritise the interest of shareholders in a corporation. The directors were asked to rank the stakeholders according to the priority of their interest. According to the survey, the shareholder’s interest was the number one priority by the majority of directors, followed by interest of the company and employees. While ranking their priorities, 74 percent of directors rank shareholders interest as their number one priority (Anderson 2007). 

From the survey, it is clear that directors prioritise the interest of shareholders in the organisation, but the outcome of study does not conclude that pursue of shareholder interest adversely affect the interest of other stakeholders. Shareholders do have priority over other stakeholders, but some directors have ranked employee’s interest as the priority, making them appear equivalent when compared to other measures. For example, the company’s short term profits are not considered as a priority for the shareholders, by the directors.

The survey did not conclude that interest of other stakeholders is not being prioritized. Even if the shareholder’s interest is number one in the ranking, employee’s interest has ranked higher in these respects. For example, the interest of employees ranked higher in the list with some directors prioritising their interest as number one on the list. Therefore, the survey concluded that the shareholder’s primacy is a general viewpoint, rather than a specific policy made to maximise the profits for shareholders of a company.

The survey concluded that the shareholder primacy is not a legal policy nor it is result of the misguided views of company’s directors. The directors understand they are legally allowed to choose any approach, which is beneficial for all stakeholders of the company. The survey suggested that, corporate governance approach for overall achievement of goals has developed in the past decade, and it is the reason for failing of corporate governance, tormenting Australia along with many other countries (Mitchell 2005).

 

Recommendations

To protect the interest of various stakeholders and avoiding shareholders primacy, following steps could be taken by the company’s directors:

  • The directors should issue an annual statement before the annual general meeting called “Report of Significance Stakeholders and Materiality”. The report identifies various stakeholders of the corporation and ranks their interest according to company’s priorities. The report should address the interest of various stakeholders and contain a page of communication between the company and its stakeholders, regarding their various issues. There are several benefits of adopting this approach, for example, if company prioritise the interest of small-term shareholders, then only those issues are material, who affects the interest of small-term shareholder. If company prioritise the interest of employee’s, then the dividends will cut before accepting the lay-offs of employees (Eccles 2015).
  • The board of directors should arrange meetings of various stakeholders, to understand their issues and achieving benefits for them. The shareholders can present their issues in the annual general meeting, but it is hard for other stakeholders to present their issues. The meeting of other stakeholders, help in reducing their issues and assist in avoiding shareholder primacy. This approach helps in maintaining a healthy relationship between officers and stakeholders of a corporation. The policies for the diverse audience of an organisation are prepared by analysing the meeting of stakeholders.
  • The board of directors should apply the policies of corporate governance, helping them fulfil the various interests of different stakeholders. These policies require directors to perform certain duties, for the benefit of stakeholders. The corporate social responsibilities of a company require timely and complete disclosure from the board of directors. The disclosure stops directors from prioritising certain stakeholder’s interests, and avoid the other stakeholder’s interest (Macey 2003).
 

Conclusion

The objective of an organisation is growth and expansion, rather than collecting profits for shareholders. The company has various stakeholders including, but not limited to, shareholders, bondholders, employees, suppliers, managers, and directors. The board of directors should form policies for the benefits of all the stakeholders’ interest, instead of making policies just for a category of stakeholders. The shareholders are an essential part of the corporation, but shareholder primacy is not the approach for the growth of the organisation.

The company should take certain steps to increase the role of corporate governance in the organization. The overall growth of a company is beneficial for all the stakeholders’ interest. Timely and complete disclosure is a necessary part of a corporate social responsibility and the directors should perform their duties to maintaining transparency in company’s operations.

 

References

Golob, U. and Bartlett, J.L., 2007. Communicating about corporate social responsibility: A comparative study of CSR reporting in Australia and Slovenia. Public Relations Review, 33(1), pp.1-9.

Damian, D.E. and Zowghi, D., 2002, September. The impact of stakeholders' geographical distribution on managing requirements in a multi-site organization. In Requirements Engineering, 2002. Proceedings. IEEE Joint International Conference on (pp. 319-328). IEEE.

Fletcher, A., Guthrie, J., Steane, P., Roos, G. and Pike, S., 2003. Mapping stakeholder perceptions for a third sector organization. Journal of Intellectual Capital, 4(4), pp.505-527.

Farrar, J., 2008. Corporate governance: Theories, principles and practice. Oxford University Press.

Sharma, V.D., 2004. Board of director characteristics, institutional ownership, and fraud: Evidence from Australia. Auditing: A Journal of Practice & Theory, 23(2), pp.105-117.

Christensen, J., Kent, P. and Stewart, J., 2010. Corporate governance and company performance in Australia. Australian Accounting Review, 20(4), pp.372-386.

Nguyen, H. and Faff, R., 2002. On the determinants of derivative usage by Australian companies. Australian Journal of Management, 27(1), pp.1-24.

Grossman, H.A., 2005. Refining the role of the corporation: The impact of corporate social responsibility on shareholder primacy theory. Deakin L. Rev., 10, p.572.

Anderson, M.E., Jones, M.A., Marshall, S.D., Mitchell, R. and Ramsay, I., 2007. Evaluating the shareholder primacy theory: Evidence from a survey of Australian directors.

Mitchell, R., O'Donnell, A. and Ramsay, I., 2005. Shareholder value and employee interests: intersections between corporate governance, corporate law and labor law. Wis. Int'l LJ, 23, p.417.

Eccles, R.G., and Youmans, T., 2015. “Why Boards Must Look Beyond Shareholders.” MIT Sloan Management Review. Retrieved from < https://sloanreview.mit.edu/article/why-boards-must-look-beyond-shareholders/ >

Macey, J.R. and O'hara, M., 2003. The corporate governance of banks.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Shareholder Value And Employee Interests. Retrieved from https://myassignmenthelp.com/free-samples/shareholder-value-and-employee-interests.

"Shareholder Value And Employee Interests." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/shareholder-value-and-employee-interests.

My Assignment Help (2018) Shareholder Value And Employee Interests [Online]. Available from: https://myassignmenthelp.com/free-samples/shareholder-value-and-employee-interests
[Accessed 27 May 2020].

My Assignment Help. 'Shareholder Value And Employee Interests' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/shareholder-value-and-employee-interests> accessed 27 May 2020.

My Assignment Help. Shareholder Value And Employee Interests [Internet]. My Assignment Help. 2018 [cited 27 May 2020]. Available from: https://myassignmenthelp.com/free-samples/shareholder-value-and-employee-interests.


MyAssignmenthelp.com has become one of the leading assignment help provider in New York City and Boston. We provide top class auditing assignment help. Not only auditing, but we also cover more than 100 subjects and our writers deal with all types of assignments with utmost expertise. To make writing process faster and accurate, we have segmented our assignment experts' teams as per their expertise on writing different types of assignments. We guaranteed that students who buy our assignment online get solutions worth their investment.

Latest Management Samples

SRR782 Research Methodology

Download : 0 | Pages : 10
  • Course Code: SRR782
  • University: Deakin Business School
  • Country: Australia

Answer: Title: Reduction Of Construction Wastes During Construction Work Of Large Scale Projects In Developing Countries Section 1: Annotated Bibliography Miquel Casals, Núria Forcada, Marcel Macarulla, Analysis of the implementation of effective waste management practices in construction projects and sites, December 2014, Volume 93, 38 “Current waste generation rates are still below predicted levels, and the infrastru...

Read More arrow

BUS708 Statistics And Data Analysis For Proportions Of Agent Lodgement

Download : 0 | Pages : 4
  • Course Code: BUS708
  • University: Kings Own Institute
  • Country: Australia

Answer: Lodgement classification: The frequencies of agent lodgement is found by the excel formula:  “=COUNTIF(C2:C1001, "=1")”. The frequencies of self lodgement is found as: “=COUNTIF(C2:C1001, "=2")”. Proportions are counted by each count/total frequency. By clicking “Insert”, then “Pie”, pie chart is generated. The axes, borders are decorated by right clicking “Format chart area&r...

Read More arrow

MG4101 Operations Strategy 2

Download : 0 | Pages : 10
  • Course Code: MG4101
  • University: University Of Central Lancashire
  • Country: United Kingdom

Answer: Introduction  The report helps in analysing the different kind of business activities along with analysis of the service delivery along with manufacturing process of the Sky Plc Company. Proper identification of the different strategies will help in improving the different processes of manufacturing as well. Proper discussion is essential in nature wherein it has helped in making the organization successful or not successful in n...

Read More arrow

IB829 Innovation & Creativity In Organisations

Download : 0 | Pages : 14
  • Course Code: IB829
  • University: University Of Warwick
  • Country: Australia

Answer: Introduction Pepsi Company is among the largest manufacturer of snack and crisp with very high annual sales. The company is also known for its manufacture of carbonated drinks. However, Pepsi Company is not only known for the products it manufactures but also for their methods of production. The company is very creative and innovative in their activities where the company invented various brands of sale instead of selling one particul...

Read More arrow

ACC 203 Financial Accounting For Constructive And Legit Responsibilities

Download : 0 | Pages : 6

Answer: Dear Christopher, We are extremely happy to see that you have remembered us and that is why we would like to show our gratefulness in response to the mail that you have sent to us. We cannot express our joy to see that that you have written to us and we assure you to provide you with the best solution that is available. With those possibly the best solutions it will become easy for you to make the right choice and that also in an appr...

Read More arrow
Next
watch

Save Time & improve Grade

Just share Requriment and get customize Solution.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,320,224

Orders

4.9/5

Overall Rating

5,075

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

265 Order Completed

97% Response Time

Ken Campbell

MSc in Electrical Engineering

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

230 Order Completed

97% Response Time

Liya Han

Master Of Science in Geotechnical Engineering (MSc Geotec)

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

203 Order Completed

97% Response Time

Richard Alpert

PhD in Psychology

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

755 Order Completed

95% Response Time

Douglas Cowley

Masters in Finance with Specialization in Audit

Wellington, New Zealand

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

very good writings, good references and really good pronunciation. would do here again the other time. very recommended!!!

flag

User Id: 409717 - 27 May 2020

Australia

student rating student rating student rating student rating student rating

must be a stupid expert who finished my assignment, don\'t trust it when they say, how good they are. They are all lies!!! i paid 148 dollars for 1000 words, and got less than 50%.!

flag

User Id: 422981 - 27 May 2020

Australia

student rating student rating student rating student rating student rating

It was good and was satisfied with this. This is completed and was passed right away after the presentation. Thank you!

flag

User Id: 238261 - 27 May 2020

Australia

student rating student rating student rating student rating student rating

They did a good job but this time i was no happy that much because i feel i need to let them again and again then even they did't done proper what i need but anyway once happend otherwise other all are mine good and i clear too

flag

User Id: 247567 - 27 May 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?