Control: The owner not only has control of the day to day operation of the business. They also have complete control of the business and can determine what changes or improvements need to be made based on customer feedback without the approval of anyone else.…
The shareholders vote to elect a board of directors. It is the directors' responsibility to act in the best interest of the shareholders. To ensure that this is being upheld the board is made up of inside directors, senior executives and top shareholders, and outside directors, people not employed or involved in the organization. The board monitors the corporation creates policies and makes major decisions for the corporation. The directors create bylaws which detail the policies and the procedures of the corporation. They also appoint officers. This is usually a president, vice president, secretary etc. The officers run the day to day business procedures. The officers are actually agents of the corporation whereas the directors are…
* Managers are naturally inclined to act in their own best interests (which are not always the same as the interest of stockholders).…
Explanation: Also known as the Principle-Agent problem, this concept identifies shareholders as the principles, and managers as the agents.…
Owners: An owner might be a sole trader or a partnership but it a company, the owner will be the shareholders. They are often thought as the most superior stakeholders as they could possibly have put a fraction of their life into setting up the business. They look at themselves as being major risk takers and they like to see share of profit frequently increasing and the value of their business also rising.…
| Large, publicly owned firms like IBM and GE are controlled by their management teams. Ownership is generally widely dispersed; hence managers have great freedom in how they run the firm. Managers may operate in stockholders’ best interests, but they also may operate in their own personal best interests. As long as they stay within the law, there is no way to either force or motivate managers to act in the stockholders’ best interests.…
Owners are the people who fund the organisation and whose main interest is how much profit an organisation is generating. They have a big say in how the aims of the business are decided, but other groups also have an influence over decision making. For example, the directors who manage the day-to-day activities of a company may decide to make higher sales a top priority rather than profits. Not only would this generate profit, but it will create awareness and also produce a higher demand for the product or service the business offers.…
However, shareholders, the other part, are the owners of the organization. If company goes badly, they will lose their money. But managers, who don’t lose anything, have only options to earn more money with good and reasonable decisions and actions. Therefore, shareholders will try to keep their money safe. They are not in favor to risky decisions that can be dangerous for the wealth of the company. Here is the main difference, a manager could risk the money of the company in…
Altogether, there are about eight organizational structure types. Each company has to find a way of putting these “pieces of the puzzle” into one well thought-out outline to represent the necessary relationships. In this case, we’ll be looking at the divisional structure. According to the text, “as organizations grow and become increasingly diversified, they find that functional departments have difficulty managing a wide variety of products, customers, and geographic regions. In this case, organizations may restructure to group all functions into a single division and duplicate each of the functions across all the divisions (Bateman and Snell 8th edition, 2009).”…
Top managers are viewed as agents of the Board of Directors. The Board of Directors can be considered the agent of the shareholders.…
4 (b) Evaluate the argument that managers controlling large companies might follow policies which do not necessarily maximise the profits of the owners.…
Owner: Owner are those who own the business and invest money to start that business. While taking decisions managers need to consider the owners and what they want from the business.…
An individual and teamwork within an organization refers to the organizational structure. Organizational structure can also identify the positions in a company and define the individual job role. Individual work needs to be in line and managed to accomplish organizational goals. Structure is an important tool in achieving organization, for it breaks down relationship between the employer and employee and open communication channel. The Home…
Senge’s (1990) position is that the structures within organizations influence the behavior of its members: “Different people in the same structure tend to produce qualitatively similar results” (p.40)…
According to Alawattage and Wickramasinghe, agency theory suggests two fundamental reasons for the agency problem. First is the goal contradiction between the agent and principal. Second reason is the information asymmetry between the agent and principal. Principal does not know the amount of effort the agent is putting in his work. This information it can only be accessed with incurring the additional cost (agency cost). The challenge for the principal is to devise the contract which motivates the agent to a level of effort that would maximise the principals’ profit.…