Blog
Owners v Managers and the Principle Agent Problem
24th May 2009
Simon Evans writing in the Independent asks if we are seeing an age of greater shareholder activism against the entrenched power of executives at the helm of listed companies? A useful article for A2 students keen to have some examples of shareholders putting more pressure on managers but the limitations of scrutiny that lies at the heart of the principle-agent-problem.
”Owners vs managers
Bellway: Almost 60 per cent of shareholders at Bellway’s AGM in January voted against a bonus deal for John Watson, the chief executive, which would have seen him awarded a bonus worth more than half his salary.
Target Corporation: New York-listed Target is under pressure from Pershing Square Capital Management after a decline in profit. Target is cutting costs by freezing the salaries of senior managers and taking on rival Wal-Mart by expanding its food sales. Pershing, with an 8 per cent stake, wants more substantial moves, such as replacing the board of directors.”
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.