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Need an research paper on are fair values used to assess management's stewardship. Needs to be 5 pages. Please no plagiarism.
Need an research paper on are fair values used to assess management's stewardship. Needs to be 5 pages. Please no plagiarism. Agency Theory outlines that there may be a conflict of interest between the shareholders and managers of the firm. The basic objective of managers is to ensure that they act in a manner which always results in an increase in the value for shareholders. This, therefore, requires that the managers must actively pursue the objective of maximizing shareholders wealth.
This objective, however, may be jeopardized as the managers may take actions which only result in their own benefits and may not entirely result in the creation of value for the shareholders. For example, managers may make decisions to increase their compensation or earnings regardless of the fact that such actions may damage the overall shareholder interest in the short or long run. Such conflict of interest, therefore, outlines that the managers must have been kept on watch in order to ensure that their actions do not result in losses for shareholders. It is because of this reason that the theories of corporate governance have been forwarded to design a framework which can ensure that the managers must act in a certain manner. This is for ensuring that the overall interests of the shareholders are protected while at the same time ensuring that the managers get a substantial authority to pursue such objectives. (Cane, 2008)
An opposite to Agency theory is the theory of stewardship which requires the shareholders to basically to assume the roles of managers. Through the active participation of shareholders, it may be possible to have an effective check over the actions of managers.
Managerial Stewardship
Stewardship as a concept has some ethical considerations because it embodies the ethical responsibilities of the management to responsibly plan and manage the resources of the firm. From accounting and finance perspectives, managers, therefore, are considered as the custodians of the firm’s resources and it is their professional and ethical responsibility to ensure that they plan and manage resources in the best of the interest of the organization and hence its shareholders.
It has been, however, outlined that the overall research on understanding the stewardship and the role of managers has been limited. It is also because of this reason that the accounting standard setters face a dearth of information which can further strengthen the stewardship ability of the managers. Stewardship theory, therefore, outlines that the managers are stewards rather than rational individuals having their own self-interests.
One of the early proposals on the convergence of financial reporting frameworks was based upon the fact that the sole purpose of financial statements of a company should be based upon providing complete information which is useful in making investment and credit decisions. The proposal also included the providence of information in order to make a better allocation of resources. This therefore required that the managers' sole purpose is to serve as the stewards of the firm and to make decisions which can effectively help the organizations to better allocate their resources. This optimal allocation of resources, therefore, can further result in the increase of shareholder wealth because shareholders share the highest level of risk. (Lennard, 2010)
In order to assess whether the company accounts should allow shareholders to assess the stewardship of managers or not should be based upon the criteria of decision.
