What is the process whereby the owners of a corporation control the firm's management?

Answer 1

Control of the corporate (firm) ultimately rests with stockholders. They elect the board of directors, who, in turn, hire and fire management. The fact that stockholders control the corporation was made opening of this chapter. Even though he was a founder of the corporation and was largely responsible for its most successful products, there came a time when shareholders, through their elected directors decided that Apple would be better off without him, so out he was.

An important mechanism by which unhappy shareholders can act to replace existing management is called a proxy fight. A proxy fight is the authority to vote someone else's stock. A proxy fight develops when a group seek proxies in order to replace the existing board, and thereby replace existing management.

For example, in January 1996, a group led by Bennett LeBow launched a proxy fight at RJR Nabisco the tobacco and food products giant. LeBow essentially wanted RJR to split up into two separate companies, arguing that this would enhance stock prices. The existing board declined to take this step. LeBow's group therefore proposed its own slate (version) of directors, and RJR shareholders voted on whom they preferred. As it turned out LeBow's proxy fight was unsuccessful. At the annual meeting in April, RJR stockholders voted against his slate by more than a 3‑to‑1 margin, so RJR stockholders apparently disagreed with LeBow's strategy.

Another way that management call be replaced is by takeover. Those firms that are poorly managed are more attractive as acquisitions than well‑managed films because a greater profit potential exists. Thus, avoiding a takeover by another firm gives management another incentive to act in the stockholders' interests.

Answer 2

Describe process whereby the owners control the firm's management

Answer 3

Describe the process whereby the owners control the firm management?