The phenomenon of risk is inseparable from the business environment. Therefore, the distribution of power in the business setting and the subsequent decision-making process have to occur very carefully, with maximum awareness among the key parties. For this reason, the power of shareholders may be limited due to the need to balance out the opportunities and threats that a company may have in the global market and of which shareholders may not be aware (Gryglewicz). A case of recently deceased Hunter Harrison’s pay having been settled with shareholders indicates that the responsibility of the compensation committee has been growing, while the shareholders’ influence on corporate decisions and particularly financial choices has been reduced (“CSX Board”). The observed tendency for corporate governance to embrace the concerns of every stakeholder can be explained by the need to seek opportunities for continuous growth in an increasingly competitive environment.
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A brief analysis of the recent instances of shareholder-associated conflicts points to the fact that the role of the latter has been diminished in the business environment. The observed trend can be explained by the necessity to introduce cohesive and positive changes to the setting of an organization by allocating its finances properly and investing in the assets such as its human resources, R&D potential, and the associated areas (Gryglewicz). However, the proposed solution to the shareholder dilemma may spark conflicts in the economic environment due to the power conflict (“CSX Board”). The lack of actions, in turn, may lead to errors in decision-making and the choice of the actions that may ultimately lead to a firm’s demise.
Since the dilemma concerning the role of shareholders in corporate decision-making and the allocation of financial resources is a point of numerous concerns, it is necessary to design the framework that will involve establishing rigid ethical principles as the cornerstone for decision-making, at the same time providing shareholders with the agency to review changes and participate in discussions (“Leblanc”). The active involvement of shareholders in the company’s compensation programs and the challenges that an organization faces is also critical since it will give the target audience a general sense of the reasoning behind the choices that require management and distribution of corporate funds. It would be erroneous to believe that the selected strategy will immediately lead to the resolution of shareholder-associated conflicts in the business setting. However, the suggested tool will open possibilities for a dialogue between the parties involved in the management of financial resources, thus making the role of shareholders more meaningful and their impact more positive for an organization.
While the observed trend in the global corporate setting to reduce the role of shareholders can be seen as a source of concern for the latter, it can be justified by the increased risks and the spontaneous nature thereof. Thus, it is recommended that companies should concede and compromise by limiting the decision-making power of shareholders and using the advantages that emerge in the target environment (Gryglewicz). The case of the decision regarding Hunter Harrison’s offer and how it was handled proves that the modern economic setting is much more open toward new opportunities, which requires instantaneous decision-making and may limit the power of shareholders. Consequently, the implementation of the proposed change will involve the shift in the balance of powers and the introduction of decision-making opportunities for the board, while shareholders need to be informed about the board’s decisions.
“CSX Board Saddles Shareholders with Decision on Hunter Harrison Pay.” BNN Bloomberg. 2015, Web.
Gryglewicz, Paul. “Executive Pay Needs Fixing: Shareholder Interests Clash over Compensation Programs.” Financial Post, 2015, Web.
Leblanc, Richard. “Three Ways for Shareholders to Have Their Say on Executive Pay.” The Globe and Mail, 2015, Web.
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