This article deals primarily deals with growing conflict of interest between Shareholders

& Managers/Top level Management of a business & how its reaching a deadlock.

Key Highlights:

 Shareholders who invest their money & buys shares of a company obviously
would want to have more return on their investment in the form of dividends,while
on the contrary managers would want to have higher compensation packages
since they are involved in managing day to day affairs of the organisation &
taking key decisions on which profitability of the business depends.

 They are involved in managing the whole business so would want more rewards
for their work.While shareholders thinking is opposite.

 Further article sheds light on benefits of short term investing by investors as

compared to long term investors & its growing trend & how it provides liquidity to
the market alongwith other benefits like facilitating mergers & lowering
transaction costs.

 Next area which is being discussed is increasing role of Institutional Investors like
mutual funds,pension funds,endowments etc who manages peoples money &
invest in large trades or securities.

 Instituitional investors are more advantaged compared to individual investors

since they can employ more resources in form of cutting edge technologies like
algorathmic trading which retail investors cant afford while retails investors can
enjoy volatility in securities markets & make short term profits.

 Stock markets often react to market noise or even before that information is
being out to public & the short term stock movements do reflect the effect of this
information which is sometimes irrational.Importance should be given to long run
trends than short term fluctuations.

 Regulation fair Disclosure advocates transparency & all discosures be made

public to attaract investment but it has caused issues to small & complex
companies in attaracting analysts.Shareholders holding more than 5% of
holdings in the company are exempt from Reg FD.

 Apart from conference calls before release of corporate earnings there should be
informal communication between managers & long term shareholders to improve
corporate governance.

 The main objective of business should be wealth maximization for

shareholders.The agents(managers) should not take undue advantage of
their positions in business & also of their principals(shareholders) by setting their
own salaries & packages higher than normal.
  Shareholders can anytime sell their shares & invest elsewhere if they feel that
their business is not managed well.

 Shareholders should oversee & keep the management in check but if they are
widely spread or dispersed then there appears to be an issue.

 Intermediaries like ISS(Instituional Shareholder services) offers services to make

better corporate governance but they provide handful of practices which lacks
success in this area.

 Shareholders are not owners of the company & are only entitled to vote if they
have held shares for more than 2 years("say on pay" rule).

Conclusion:
 Going forward companies should focus & maximize employee & customer
satisfaction which are more critical in long run so as to increase shareholder
value in return.

 There should be culture of fostering healthy relationship between

board,management & shareholders & by giving more value to long term
shareholders good corporate governance could be achieved.