Corporate governance today involves a great deal of conflict between stakeholders versus shareholders.
When it comes to stakeholder versus shareholder, the shareholder has only the best interests at heart. This aspect of stakeholder versus shareholder can be taken too far.
The shareholder wants a company to succeed and build a long term residual value for its shareholders. If the business does not grow sufficiently then the shareholders would certainly wish to take action and let the stock price fall to correct the balance sheet.
In a shareholder-owned business in the interests of the stakeholders have priority over the interests of the shareholders. Of course the shareholders are asked to make monthly and quarterly contributions to the funds set up by the board or management committee, but the shareholders have no say in how that money is spent.
The stakeholder can do something about this situation, because the shareholders can stop a company from behaving as if it were a shareholder-owned business. The shareholder can demand that the board not spend its cash reserves as the stock price falls.
Sometimes the share of common stock may depreciate, but is actually being purchased from the bank at a significantly lower price than the market price of the same stock on the open market. When this occurs, a corporation can be allowed to pay the bank directly for the shares instead of paying the shareholders their dividend.
The worst that can happen to the corporate social responsibility theory share price is that the stock will go to zero and the shareholder does not get any of the profits. The next time there is a special meeting, the shareholder can bring this to the attention of the board and cause them to allow the corporation to repay the bank with stock.
It may seem like a serious political issue but the majority of the board are the stakeholder vs shareholder type. They may feel like they cannot get the right share prices and may resist shareholder demand.
Some management committees of publicly traded corporations have included this into their voting procedures, so that their share holders of common stock will receive
when the stock price goes down. However, the dividend policy is usually quite strict and the shareholders can hardly complain.
This is the reason why corporate governance must be able to work with both shareholder and stakeholder goals in mind. The board of directors should be capable of controlling the shareholders’ demands and even allow the shareholders to win some of the times when the share price is lower than the projected price.
For many years businesses have tried to achieve more profits have increased by the billions in recent times. Even if you are not doing well financially, there are many ways that you can increase your value.
Make sure that you do not forget the important side of the shareholder vs shareholder battle. Shareholders are entitled to a share of the profits and if the board allows them to stay invested in the stock for an extended period of time then that is what shareholders expect