Stockholders and Managers

In classical corporate financial theory, stockholders are assumed to have the power to discipline and replace managers who do not maximize their wealth. The two mechanisms that exist for this power to be exercised are the annual meeting, where stockholders gather to evaluate management performance, and the board of directors, whose fiduciary duty it is to ensure that managers serve stockholders' interests. While the legal backing for this assumption may be reasonable, the practical power of these institutions to enforce stockholder control is debatable. In this section, we will begin by looking at the limits on stockholder power and then examine the consequences for managerial decisions.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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