Posted: June 11th, 2022
Please answer part 1 and part 2 in 350 word limit in APA format with text citations.
Also need to reply to 3 classmates posts with 150 word limit each (Classmates posts are attached)
Part 1: Stockholders and Management Interests
Stockholders and managers want the same thing, don’t they? Theoretically, yes, but in reality, it does not always work that way. Too often, managers’ personal goals compete with shareholder wealth maximization. Sometimes, managers pay themselves excessive salaries or bonuses that are at odds with the idea of shareholder wealth maximization. How many times have you seen in the news examples of CEO excesses or outlandish spending on events or things that definitely do not help the overall goal of stockholder wealth maximization?
To prepare for this Discussion, think about a time in your professional experience when a decision was made that seemed to benefit a specific manager or small group of managers and not the overall corporation. If you do not have professional experience directly related to this topic, research a situation in the news where this theme is demonstrated. Consider the outcomes of such an imbalance between manager and stockholder interests and research on how to avoid such a situation.
Describe the situation from either your professional experience or your research.
Explain two or more motivational tools that can aid in aligning stockholder and management interests.
Explain how your selected tools are effective in resolving potential conflicts among managers and stockholders.
Support your discussion with appropriate academically reviewed articles. Use APA format throughout.
Part 2: Application of Concepts/Time Value of Money
Review the video links below. Based on the materials presented in these videos, discuss how you will use the time value of money concepts in managerial decision-making. Be specific and give examples based on your experience or research.
Time Value of Money: https://www.youtube.com/watch?v=m3azU7gYHc0
A decision was made that benefitted a specific manager and not the overall corporation when the manager requested an increase in his benefits and allowances. The scenario occurred due to the selfish motives of the manager, who looked to improve his remuneration packages, and it also lacked the consideration of the other members of the organization (Dorobantu &Gupte, 2022). Different motivational tools can assist in aligning the stakeholder and management interests. One tool that can be used in aligning interests is the value alignment framework, which ensures that the organizational members can understand how their values align with the organization’s mission and goals. It focuses on ensuring that the organizational managers understand the importance of adhering to its values, leading to favorable outcomes in adherence to the set organizational rules.
Another tool used is stakeholder management, which focuses on maintaining good relationships with the organizational members who add value. It will ensure effective communication with all stakeholders in all activities carried out. These tools will play a critical role in resolving potential conflicts between managers and stakeholders (Dorobantu &Gupte, 2022). The value alignment framework ensures collaboration between the management and other staff in the organization to ensure that all the ideals and interests of the different stakeholders are adhered to. Additionally, it will ensure that no individual or group of people can advance their interests without the consideration of others. The stakeholder management tool is also effective in reducing any possible conflict since all the stakeholders will be actively involved in decision-making, which will lead to the avoidance of any conflict in the running of the organization.
Implementing the time value of money in decision-making will is critical in realizing favorable outcomes. It will ensure that the investors can make more informed decisions with their money. The managerial team can understand the best options based on interest, inflation, risk, and return (Muda & Hasibuan, 2018). This is based on the fact that the present money will be more valuable in the future, and this is because of the potential earnings it will bring. The managers can focus on current transactions and operations of importance while considering the potential returns they are likely to gain from these financial activities (Muda & Hasibuan, 2018). Through this, any financial decisions made will be based on the fact that the value of money currently cannot be compared to the value of the money after a particular period, such as one year. Managerial decisions will be based on understanding the long-term impact of current operations, which are done, and how this may positively or negatively impact the organization’s outcomes.
Since the dawn of the business world, there has always been a conflict of interest between the stockholders and business managers even though both of these parties are equally concerned with the profit performance of the company. It is important to note that the bonuses that the stockholders receive along with their shares are highly dependent upon the performance of their business profits. On the other hand, a manager is dependent upon living up to the profit goals of the business. There is an important theory known as the agency theory that is helpful and proper monitoring, bonding, and controlling all kinds of conflicts of interest that might be existing between the stockholders and managers. Apart from such conflicts There are several examples that show that a CEO sometimes spends excessively on such events that do not help in achieving the goal of maximizing the stockholder wealth. There are criteria for the stockholder wealth maximization that suggest that the interest of a business should always consider the decisions that are associated with maximizing the market value of the share of the wealth of the stockholders (Ahmed, 2018). Some of the examples in this regard include the excessive spending on Wall Street by the CEO when Dennis Kozlowski involves his company paying 1 million dollars for his wife’s birthday. There are also some incidents that can be mentioned here when discussing the decisions that were made by the managers as these decisions seemed to be beneficial for them but overall these decisions did not benefit the corporation. One of the examples is related to the market share of Motorola in the mobile phones in 2006 which was 22%. But Motorola failed to work on launching any new generation of phones and it started to sell the old cell phones at a discount by 2007. Initially, the decision seems to be beneficial to the managers but in the long run, the company had to face several challenges when a new line of Razr phones was released in 2010 but the market was already using iPhones and BlackBerry.
Certain issues arise due to the imbalance that exists between the managers and stockholders of a company and in order to avoid such scenarios it is important to describe the problem properly and make a strategy to resolve the issue with full transparency. It is additionally critical to confine the capacities and powers of the two players by presenting commissions and rewards (Dobson, 2019). It is also important to restrict the capabilities and powers of both parties by introducing commissions and bonuses as it could prove helpful to stop motivational tools including compensation packages and direct intervention by shareholders in firing and hiring the managers that can prove to be helpful and restricting and aligning the interest of both stockholders and managers.
The time value of money is an important concept that is used to estimate and analyze the profits or losses that a business might have to face in the near future. In all that you understand the concept of the time value of money, the present value, as well as the future value, are very crucial to know properly. The present value is defined as today’s value of a future cash flow. It is a well-known fact that the money that is earned today is always greater as compared to that of future earnings (Jensen, 2013). There are two factors that play a huge role in investment opportunities and inflation. One of the best pieces of advice is to take all chances to earn money in the future because with every passing day the interest rates would vary and it would lead to a decrease in the value of money.
Part 1: Stockholders and Management Interests
The organization deploys different strategic measures to enhance its competitive activity and achieve the set goals. The determination of competitiveness in different business firms requires better strategies to meet the objectives and maintain a relevant approach to achieve the set goals (Ciepley, 2020). The company should learn how to manage wealth maximization and handle the primary based on long-term goals. Stockholder wealth maximization has helped the business to understand the need to generate revenues to meet the client’s needs. The lack of proper stockholder wealth maximization in a company contributes to different ineffective and incompetent measures to achieve the set goals and objectives.
Ultimately, business firms can make bad decisions that lead to the misuse of resources. Some managers have different biases when making decisions and implementing various strategies to complete the tasks. According to the information collected, the decisions do not favor all the individuals and allow the company to learn how to prevent discrimination among the members. A biased decision-making approach is applied in the U.S. and they learn how to manage their decisions that contribute to effective profit-making to meet the required goals.
Motivational Tools to Be Used
The organization’s management considers the application of motivational tools to enhance its performance standard. The employees require motivational factors to make them focus on their interests and learn how to create better relationships with the business. Motivational factors enhance the balance between the management and stockholder interests. The organization’s management deploys two main motivational factors, such as compensation packages. The approach gives the company the freedom to engage in different business activities with the goal of achieving the set objectives.
Realistic Compensation Packages
The information on the realistic compensation packages has helped in different areas and made the business engage fully in running its operation. It is considered a special tool used to motivate both employees and stakeholders in different fields (Guerard et al., 2021). The application of compensation packages should be offered without discrimination in various areas. The company’s management should learn how to engage managers with leadership skills to provide the compensation packages and reduce the risk of interfering with the packages and other factors interfering with the operational activities.
Giving Stakeholders the Freedom to Intervene Directly
The company deploys compensation packages to allow the stakeholders to share their opinions freely and ensure they focus on the sense of ownership to get motivated by using their freedom in the business.
Effectiveness of Motivational Tools in Solving Conflicts
The company’s management should learn different motivational tools used to maintain an effective compensation package for fundamental business success. The organization’s management should ensure they identify the factors contributing to conflicts and how to solve them effectively. Both stockholders and managers rely on the guidelines to provide better compensation to achieve the set goals and objectives. The organization’s management should ensure they focus on excellent performance through compensated packages. They were both engaged in making decisions and learning the best option to improve the company’s performance.
Ultimately, the stockholders engage in different areas of intervention directly by making suggestions on the company’s performance and minimizing the threats. The company’s management should ensure they make changes to prevent conflicts with the managers. An application of direct intervention between the managers and stockholder leads to better decisions in the business. The intervention improves the satisfaction of the stockholders and resolves the conflicts between the managers and stockholders.
Part 2: Application of Concepts/Time Value of Money
The time value of money is applicable in the financial proposition to help the management estimate the amount of money and the present value to complete the set goals. For example, the company can give around $50,000 using either of two options. It can be done by then or wait until the near future (Heracleous & Lan, 2022). Therefore, the first opinion is to take at the time when the amount is equal to what has been taken in the present and invest in the business by earning the interest. According to information research, the time value of money is useful and it requires the company to make the right decision and predict the future financial position. The managers should take the risks by focusing on a specific investment to either gain or lose in the business.
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