engleski

Managerial Ownership As An Incentive For Managerial Actions

Lately, the effect of firm size on managerial compensation becomes much poorer while compensations of top management team are associated mostly with the firm performance. Specifically, the use of stock options and other forms of deferred compensations puts the firms’ growth as the most important goal to managers because that is how they can exaggerate the decisions and actions about firms’ growth. TMTs’ effort of is difficult to measure, so it is almost impossible to define how much effort the manager should invest to deliver the maximum in performing their job. Participation in ownership could provide financial incentives to managers that will make them more connected and committed to the organization and more motivated at work. Increased motivation will have direct effects on improving productivity through greater efforts and possible innovations. If the firm achieves higher profits in the long term/run, managers-shareholders will increase their wealth by receiving dividends and / or due to higher stock prices at the capital market. Managerial ownership can be viewed as a way to combine the interests and goals of managers and owners, which increases with the enlargement of manager's share ownership (Jensen, M. C. and Meckling, W. H., 1976). By increasing their ownership in firm, top managers are increasing their relative power and thus reinforce and consolidate their position. Therefore, this paper discusses how managers could use their power to achieve their own interests at the detriment of the interests of other shareholders, so all that can create a negative effect of ownership.

managerial compensation; gain sharing; managerial actions; firm strategy

nije evidentirano