Table1: Ownership, Corporate govern

Table1: Ownership, Corporate governance problems and the priorities of the board
None or low Managerial ownership Some Managerial ownership
Firms with
Dispersed
ownership
1) Important Management – Shareholders
agency problem: individual shareholders are
concerned that management pursues its own
utility maximization at the stake of firm value,
but each Shareholder lacks incentive to
monitor individually (free-riding problem)
Board of Directors: main task is to monitor
management and align management actions
with shareholders’ interests.
Alternatively: Market for managers, Takeover
threat