Discussion 3

Part 1: Stockholders and Management Interests

Question 1

The goal of every organization is to make a profit as it can reduce the cost. The developing company wants to attract more stockholders in the company rather than a stagnating business organization. The prime goal of the organization is to increase the wealth of the shareholders and to maximize the profit. The decision-making of organizational management should be based on the maximization of the sales of the organization to promote the business. The conflict between the managers and the stockholders can be initiated because of the differences of interest (Chaffee & Davis-Nozemack, 2017). The managers should adopt those decisions that can increase the wealth of the organization by giving the allowance, accommodations, and travel expenses. There is an auto industry in the United States that has made the decision where the management focuses on their profit and services rather than stockholders.

Question 2

There are many tools to make the alignment of interest of managers and stockholders as direct interventions by the stockholder in operation, the competitive compensation packages to managers., performance appraisal, and agreement. The competitive packages help the manager for their motivation and also a sign of discouragement as to not use the finance of the organization for non-profit activities. Appreciation is one of the necessary tools to increase the motivation level of the directors and managers. The award should be given based on performance appraisal (Giambona, Graham, & Harvey, 2017). The performance contract can also be used for the alignment of interest as renewing of the contract of the managers based on their performance. This is also necessary to clarify who is increasing the profit of the organization. The shareholders have the authority to directly intervene in the project or operations.

Question 3

There are some motivation tools that can be used for the conflict resolution of managers and stockholders to increase the profitability as the compensation packages for the managers, the performance contract, and the intervention of the stockholders to resolve the conflict. The managers and the stockholders could both agree on the compensation based on the performance of the management because the low-performance managers cannot expect the compensation (Giambona, Graham, & Harvey, 2017). The decision-making process can be comprehended when stockholders can intervene in operations and projects. It is also necessary to analyze the performance of the managers and the satisfaction of the stockholders.

Part 2: Application of Concepts/Time Value of Money

The concept of the time value of money is crucial for the business organization as the value of money today and in the future is the same, and it is needed for development. There are many organizations that prefer to sell the products on cash rather than credit. The money that is being received today can be invested in later operations and projects (Hamza & Jedidia, 2017). The concept of the time value of money is necessary for the organization as the managerial decisions can be made. When the decisions are made, then the investment should be considered, and the dollar value can be analyzed in the investment. For example, if the value of the dollar is greater than the future, then it is better to receive the money now rather than getting it in the future.

References

Chaffee, E. C., & Davis-Nozemack, K. (2017). Corporate Tax Avoidance and Honoring the

Fiduciary Duties Owed to the Corporation and Its Stockholders. BCL, Rev., 58, 1425.

Giambona, E., Graham, J. R., & Harvey, C. R. (2017). The management of political risk. Journal

of International Business Studies, 48(4), 523-533.

Hamza, H., & Jedidia, K. B. (2017). Money Time Value and Time Preference in Islamic

Perspective. Turkish Journal of Islamic Economics, 4(2), 19-35.