Corporate Governance - The Role of Shareholders
From the shareholders' viewpoint, corporations exist only to enhance the wealth of their owners. This means that the shareholders' perspective on successful governance is relatively simple: When management and shareholders' interests are more closely aligned, it saves money for the company and increases shareholder wealth. As a result, good governance focuses on finding the best approach to connect the interests of shareholders with those of management. Nevertheless, shareholders' standpoints are not that simple. It is common for shareholders to disagree on the best approach to establishing a company's governance since they are not all the same. They vary in a number of significant ways. Shareholders, for example, do not all have the same investment horizon. Long-term investors may accept volatility in quarterly profits and the share price if they feel that the company's management actions will lead to greater profitability in the long run. Short-term investors