Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 1, Problem 8Q
Summary Introduction
To identify: The actions that stockholders can take to ensure that the management and stockholder’s interests are aligned.
Introduction:
Stockholders: Stockholders are the owner of the company who invest funds in the business. Stockholders have the voting right and control over the management. The relationship between the stockholder and manager is like the relationship of principal and agent
Managers: Managers are the agent of the stockholders who perform for the stockholders. The mangers should not do any such action which is detrimental to the interest of the stockholders. There can be a situation where conflicts may arise between manager’s personal interest and stockholders interest, in such situation the priority should be given to the stockholders interest.
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