Corporate Governance Mechanisms Essay -- Business Administration

INTRODUCTIONThe relationship between the confessers of a company and those who impress as the company is classified as an agent/principal relationship. In most cases this kind of relationship gives rise to a potential problem called the place problem. This agency problem usually will occur where there is a conflict of interest between the desires of the principal and that of the agent. This is not a high-minded occurrence. It has been predominantly found to occur in companies where the directors are the agent and the shareholders who are the owners of the company is the principal. It is not unusual for managers to sometimes want to pursue their own interests at the expense of the company to whom they fuck off a duty to act in its best interest. Certain decision-taking may not be in the interest of the company for example, excessive risk taking without foresight of the yearn term consequences. Most times the action and inactions of management may have dire consequences on th e company which may in the long control stigmatize a company as an under acting one. Consequently, managers who pursue their own interests or else than that of the company may underperform its duties. The following corporate governance mechanisms faecal matter play a major fictitious character in preventing managers from engaging in activities that lower firm value thereby incentivizing management to perform sensitively. This taste will briefly consider three of those mechanisms that gear management towards excellent performances. Board Composition This is a principal mechanism through which the shareholders lot check managerial performance. If a management team is not performing well, the shareholders could direct the board of directors to fire the incumbent team and replace them with bankrupt perfor... ...eves that it has changed the attitudes and practices of U.S managers, stating that it represents the most effective check on management autonomy constantly devised. An d it is breathing new life into the public corporations. Works Cited Scharfstein David, the Disciplinary role of Takeovers 1988 55 the review of economic studies 185 accessed 27 November 2009 p 185. Julian Franks, Collin Mayer, antipathetical takeovers and the correction of managerial failure 1996 40 Journal of Financial economics 163 accessed 27 November 2009 p163. Ibid