The paper ' Industrial Relations Commission ' is a great example of a Business Case Study. Adolf & Means state that in modern corporations and the modern business world, the owners and controllers of a business corporation exist as separate identities (6). This separate identity enables each party to have a bird’ s view of the operations of the other party. In a corporate governance setup, the owners will be more knowledgeable about the operations of the business if they are not fussing around with the operations of the business. The same applies to the other party.
Those who control the business enterprise (management personnel) are able to work even better without having to worry about how the structures of ownership operate. However, the two parties crash at times, and lines have to be drawn between the owners and the people who control the company. This paper explores how the owners (shareholders) use different mechanisms to control the activities of the corporate controllers (managers and directors). Various arguments from Australian case laws and corporation laws will be used in this argument. The distinction of roles between owners and controllers Many people invest in companies that do not have a direct role in the operations of the same on a day to day basis (Mulili and Wong 14).
Matter of fact, most of the people who buy equity into various companies do not have full information about how the companies operate on a daily basis. They are more concerned about the returns on their equity and the revenues that the company is making. When people invest money into a business, it is because they are truly hopeful that their investment will pay off and they might be in a position to gain from their returns.
They want to have as many returns from the resources that they invest in a business within the shortest possible period of time. They are keener on payback periods and turnover ratios than on other more intricate factors as the running of the organizations. The controllers or rather the management, on the other hand, are tasked with much more than the role of profit generation. Sometimes you may find that the owner of an organization is also among the controllers but in public corporations which form the basis for this argument, the owners modestly called the shareholders, tend to shy away from the control part of the business.
Rather, they hire and entrust professionals, called the management to do this for them. The management primary role is to make money for these owners. However, they are also tasked with other roles such as ensuring that the company retains its perpetuity and competitive advantage even in the future. Avenues of conflict between the owners and the controllers Due to the forms of the pressure of ensuring that the company is profitable even in the future, sometimes the management may make some decisions that do not completely fall along the lines and likeness of the owners and it is here that the conflict between the two parties arises.
At other times, the owners may think that the management of the company is misappropriating the resources that they have at their disposal. As owners, this gets them very concerned because they are the ones who are likely to shoulder the loss arising from this misappropriation of resources.
They keep a keen eye on the conduct of these professionals and they demand that they conduct themselves in a manner that will protect the interests of the owners at all times and in a way that justifies the salaries that they draw from these companies. So how do the owners ensure that the management is kept to their toes to make sure that they do not bring losses to them? The following paragraphs detail the mechanisms that are used by the owners to compel and control the conduct of the management of the companies that they own.
Adolf, Berle & Means, Gardiner. The modern corporation and private property. New
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Hargovan, Anil. Australian securities and investments commission v MacDonald [no 11]-
corporate governance lessons from James Hardie. 2009. Web
< http://www.mulr.com.au/issues/33_3/33_3_12.pdf >
Industrial Relations Commission of New South Wales. McGrath v Managing Director
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