Corporate Wealth, Agency Conflict

Corporate Wealth, Agency Conflict

Corporate wealth; as I understand it goes way beyond shareholder value, which has been for years embossed in the media and one could have easily imagined that nothing goes beyond shareholder value. Shareholder value has been put as an excuse for short-term money-making and financial engineering which at the end left many companies under a load of debt; from the long-term point of view. Many became very rich, no doubt about it, those who left sinking Titanic at the right time.
Interests of management and stockholders may be years apart. In case of absence of proper control system and/or compensational system for management the agency conflict might arise. It is supposed that management will enforce the actual aim of corporate wealth to their own interests which can be characterized as keeping the job as long as possible, minimizing the risk of their own failure and gaining their personal wealth rather than focusing on corporate wealth. To my opinion, we talk about typical conflict of interest which in theory can be enforced by proper setting of goals and tighten management performance to firm’s wealth, in reality we talk about residual loss which in fact can never be coordinated by 100% so dispute will always exist.
Corporate wealth is the entire environment, in which the company operates, creates value for any of those associated and successfully invests in its long-term survival. Company does not consist of shareholders only; many other subjects are parts of this pie surely willing to take a piece of it, so are corporate goals to be set and followed. In fact, wealth is something being generated which sooner or later gets used up in a process of living and/or creating new wealth, a never ending circle of creating an added value. In the long run, every single part of company’s environment matters; oversimplification of stakeholders would be wrong in place though still one of the most important measures of wealth. Stakeholders buy stocks and seek to gain value;...

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