Governance Preferences Of Institutional - Myassignementhelp.Com

Question: Discuss About The Governance Preferences Of Institutional? Answer: Introduction: The company is not only a social construction but constitutes objectives and expectations of the various stakeholders. Stakeholders besides involving managers and shareholders of the organization also constitute customers, employees, suppliers and other individual or group. The owners of an organization are their shareholders (Huang et al. 2014). The Australian Institute of Company Director (AICD) held the interest of its shareholders above all the organization stakeholders. Directors are appointed by their shareholders to manage their organization. Shareholders invest capital in the organization and receive voting rights in the vital matters of the organization. In small organization, shareholders generally serve as the organization officer and director at a same time. As the shareholders are the real beneficial owner of the company, their interests are the ultimate driver of the organization (Yoshikawa and Hu 2017). The organization bears social responsibility for their shareholder s. Responsibilities of the director towards their shareholders: The major goal of the board of directors is to increase and maximize the value of the shareholders in the long-run. Shareholders values consists the considerations for minority shareholders in the organization. Efficient communication with the shareholders Returning the shareholders profit. Exercise accountability to relevant shareholders To ensure that the communication passed both to and from the relevant stakeholders is effective or not. Promoting goodwill for the organization while supporting the stakeholders. Monitor relations with the stakeholders by collecting and evaluating appropriate information. Strategies: The major strategy of the board of directors is basically based on the required conditions needed for meeting the goal of shareholders value (Boubaker, Derouiche and Nguyen 2015). Making an investment in the business of the company, the shareholders are responsible for assessing their profit return from the investment. The decision made by the board helps in determining their expectations in the terms of profits, dividends and capital growth, which is ultimately reflected by their share price. The basic method of making judgments and evaluating investments about the organization competence in which investment is done helps the shareholders in making comparison with the similar companies. For example, Cadbury Schweppes has over two billion shares from their shareholders and more than 85% are owned by the banks, insurance companies and UK USA institutions (Ciampi 2015). Therefore it is important for Cadbury Schweppes company shareholders trust manager to make efficient decisions and manage the organization to create maximum value on their behalf. Analysis: Benesee holdings proactively or entirely disclose the company information to their shareholders and investors. They provide shareholders relations disclosure tools from the annual report and company websites. The organization practices great relevance on mutual communication with their relationship with their investors and shareholders by promoting various Investor relation activities and maximizing the organization productivity. It is important for the stability of the organization to hold shares. Investors are nowadays having various different organization and options for investment to choose (Eccles and Youmans 2015). If the company in which the shareholders are investing is not producing return for them then it is the right of the shareholders to sell their shares and invest it somewhere else. The sales taking place through large institutional shareholders could further create uncertainty for the companys performance in the near future and can cause the share price to fall. This can limit the organization ability to develop. Therefore retaining shareholders interest can increase their confidence leading to the stability of the organization. The value oriented organization religiously monitors the if the buyers of the company is willing to pay valued premium beyond the companys estimated cash flows for their business units, real estate, brands and various detachable assets (Fich, Harford and Tran 2015). This analysis can fail to exploit the opportunity that can compromise the shareholders value. Kmart is a recent example, an ESL investment, where hedge fund is operated by Edward Lampert and gained the control of the company in less than $ 1 billion and later recoup his overall investment by selling their stores to Home Depot and Sears. Later on, the shares were traded at $30 and in the next year at $100 (Soltani and Maupetit 2015). This created chaos and confusion among the shareholders of Kmart and had to liquidate their entire shares at a distress price. Providing accurate information in a comprehensible manner: It is the responsibility of the directors to maintain the shareholders relations by communicating the business conditions, vision and financial position in a comprehensive and timely basis. The directors should obtain maximum feedback from their shareholders to improve the organization management and hence achieve sustained increment in their corporate value. Recommendation: The board of directors should perform their duties honestly uninfluenced by any fear or impartially. They should recognize the main responsibility to their member as a whole and regard the shareholders interest in the organization. The board should not take inefficient or improper advantages of their position. The directors should lay more emphasis on creating opportunities for dialogues with the shareholders. Therefore, more efforts should be given on vitalizing the shareholders general meeting. Increase the transparency of the shareholders in the General meeting. The directors should avoid their scheduling the General meetings of the stakeholders on all those days when other companies meeting is to be held. In the current times the shareholders should be allowed to exercise their voting rights through the internet. It is the social responsibility of the directors to value their shareholders by focusing on their core competencies to provide efficiency in their organization. For exam ple, McKinsey Co offers free consulting to their shareholders. Conclusion Therefore, it can be concluded that shareholders are the major stakeholders of the organization and the board of directors should lay more emphasis on the retaining the shareholders interest. AICD should make a proper decision regarding the relevance of the corporate stakeholders that includes both the financial stakeholders like bondholders and non-financial stakeholders like the customers, NGOs, employees and suppliers. When shareholders reviews the annual report provided by the company, in which they invested major concerns will be given on the earnings per share, dividend yields, tangible and intangible assets and price/earnings ratio. Hence, it is important for the organization to lay more emphasis on the shareholders interest. References: Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance.Journal of Accounting and Economics,60(1), pp.1-17. Boubaker, S., Derouiche, I. and Nguyen, D.K., 2015. Does the board of directors affect cash holdings? A study of French listed firms.Journal of Management Governance,19(2), pp.341-370. Ciampi, F., 2015. 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