TOTAL QUALITY MANAGEMENT ASSIGNMENT
Question 1. Reasons why the chief executive may realize that the interests of customers could conflict with the efforts to serve the share holders. Introduction:
The first thing to bear in mind is the chief executive is a newly employed person and he has extensive business experience in managerial and internal controls which are well established and he has learned that the system being used to learn the Sound Health Limited has so many loopholes and contradicting systems of control hence ha has to try his level best of influencing the employees whom he has found there to accept the changes which may bring about conflicts. Reasons:
A corporation’s managers may have personal goals that compete with the owners goal of maximization of shareholder wealth. Since the shareholders authorize managers to administer the firms assets, a potential conflict of interest exists between the groups. An agency conflict may arise if firm is a sole proprietorship managed by owner, the owner manager will undertake actions to maximize his/ her own welfare. The owner manger may probably measure utility by personal wealth, but may trade of f other considerations, such as leisure and perquisites, against personal wealth. This may bring about a conflict because the shareholders may feel undermined by the Chief executive. Managers have always been known to lead and direct an organization or a company by deploying and manipulating of resources e.g. human, capital, natural, intellectual and intangible. Share holders on the other hand are the one who holds one or more shares of stock in a joint company. In this the actual powers of the shareholders tends to be very limited though it seems that they are the owners of the companies. They don’t have any right of checking the books of accounts. This can also bring about the conflicts between the two parties. Conflict of interest happens when both parties want to maximize each benefit. The shareholders want to see higher profits as more dividends can be yielded from it whilst the managers are more interested in higher revenue because it means more expenses can be made that are beneficial to them. Both managers and shareholders have different altitude towards risk too in which the shareholders may want to invest in many companies so that they are holding less risk if one company might go into liquidation and so the shareholders financial security are not threatened. Conflict between both can also arise when there is takeover bid to the company. These can lead to managers loosing their jobs, whilst the share holders will normally gain from this takeover since they will receive above normal gain from the share price. The mechanism of the profit related pay. This means that the managers’ earnings are paid in accordance to the level of profit. The managers will then try to work hand to meet the targeted profit so that they can be rewarded more. An agency relationship arises whenever one or more individuals, called principals, hire one or more other individuals called agents, to perform, to perform some service and then delegate decision making authority to the agents. The primary agency relationships in business are those between the stockholders and managers and between debt holders and stockholders. This relationship are not necessarily harmonious; indeed, agencytheory is concerned with so-called agency conflicts, or conflicts of interest between agents (chief executive) and Principals (Shareholders). This has implications for, among other things, corporate governance and business ethics. When agency occurs it also tends to give rise to agency costs, which are expenses incurred in order to sustain an effective agency relationship e.g. offering management performance bonuses to encourage managers to act in the shareholders interests). The theory also raises a fundamental problem in organization self-interested behavior. Managers may have personal goals that compete with the...
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