Professional experience

Professional experience

Conflicts between the company’s shareholders and management are frequent sometimes. When managers award themselves a high salary, the shareholders feel the managers are trying to deviate from the main objectives of the company. When working as a junior employee in a specific organization, the managers detained a meeting prior to the annual general meeting. The sales had stagnated, and the organization had been penalized in a claim filed by one of the customers. The management raised the salary by 15 percentage. When the idea was presented to the AGM, shareholders become angry and threatened to replace some executives.

Motivational tools and effectiveness

There are motivational tools that align both parties’ interests. One of the tools is drawing presentation contracts. The tool should indicate the anticipated productivity level, which should be outlined reasonable gains for success. For example, they can peg administration compensation to their work. The tool is useful since managers will work hard to attain contract terms and gain more profits. Another tactic is by giving management ownership in the organization. This entails sharing opinions and plans. When managers have a stake in an association will make sure the company performs accordingly and make decisions that reflect firms’ interests.

Application of the concepts

Any investments should favor a dollar today compared to the dollar received later. The present values should be invested in regions that will give higher profits. When providing loans, its good to the factor time value of money before reaching the interest rate. The time value of money is related to the purchasing and inflation concepts. Both factors should be taken into consideration with whatever return rate. Since inflation harms value, the same applies to money purchasing power. Let’s give an example of the food supply. For instance, given $150 of free grocery in 2002, more groceries could have been bought if the same $150 was given a decade later.

Reply 1

Various motivational tools help in aligning management and stockholder’s interests. Some of the motivational tools which are useful includes;

Direct intercession by shareholders

Reasonable compensation packages

The threat of taking over

The compensation packages should be enough to retain and attract capable managers but not going beyond what is required. Compensation packages should be structured to reward managers based on their performance. Compensation must be based on the market price of the stock, but the price must be average over time but not on a particular date. Stockholders can intervene with the managers directly. Nowadays, most of the stoic are woned by institutional stockholders, and the institutional cash managers got the clout to practice reasonable influence over th organization’s activities. They can talk with the manager and suggest how the company should be run. Based on this, the institutional investors will act like lobbyists for the stockholder’s body. In a direct intervention with the stockholders, the managers who are not performing well can as well be fired.

Reply 2

Small firms got limited resources to invest in business activities, expansion, and growth. One of the factors that organizations should weigh is the time value of the money( TVM). The concept refers to the reality that under normal conditions of inflation, cash is worthy today compared to the same amount in the future. From the financial point of view, the time value of money entails the comparison of the value amount of money has presently compared to the future. The significance of the TVM comes in determining if the business choice that impacts $ 20,000 in revenue in a year is favorable than the one that impacts $ 22000 in five years, for example. While $ 22000 is higher. The company might end with more cash by making the $ 20,000 and investing it more for about five years. The example below should how real-time for money is an essential concept in any business. Therefore, organizations should consider spending the cash it has rather than waiting to do that in the future.

Reply 3

One of the main issues related to corporate governance is aligning shareholders’ interests with those of the executives. This is attained with a compensation program that compensates executive management for financial effectiveness. The conflicts among the shareholders and managers are frequent. The reason its because shareholders better decisions compared to the managers. It’s common for the battles to occur because managers and the shareholders both have different ideas. Some of the conflicts, not unhealthy they occur as a way of reaching a collective decision. The most important thing is getting reliable ways to solve disputes. This is because when decisions are not addressed as anticipated, the dispute might make the company experience problems. Some of the issues which might be brought about by the conflicts between shareholders and the managers is where some staff gets fired from their jobs.  It’s, therefore, suitable for the organizations to plan on how to handle the disputes.