Managerial Incentives and Corporate Governance

Research Paper (undergraduate) from the year 2015 in the subject Business economics - Accounting and Taxes, grade: A, ( Atlantic International University ) (SCHOOL OF BUSINESS AND ECONOMICS), language: English, abstract: Corporate governance involves different checks and balances with the ability to influence the incentives and monitoring of a firm’s management. Sound corporate governance is predominantly essential when a firm’s management is different from its ownership. Randall (2009) argued that in the absence of appropriate corporate governance, managers who are separate from a company’s ownership may not be incentivized to work hard towards achieving shareholders’ goal of maximizing profits. Instead, non-owner managers might end up lavishly spending money and other resources in ways that directly benefits themselves, for example on perks, and living an expensive life. Surprisingly, some other managers may be tempted to spend firm’s money to accumulate personal wealth through frauds or theft.