QUESTION 1 - 45 Marks Shareholders play a relatively minor role in the governance of companies. The management of the modern company is almost solely...

QUESTION 1 – 45 MarksShareholders play a relatively minor role in the governance of companies. The management of the modern company is almost solely reserved for the directors of the company. While shareholders maintain certain rights that can be utilised against directors who exercise poor judgement or are incompetent, these remedies are essentially reactive.The rise in the number of people owning shares over the past two decades has resulted in a dilution of ownership. Thus, shareholders have less capacity for involvement in management. The separation between ownership and management is not only a natural consequence of a widely dispersed ownership structure, but is desirable as parties who are independent of the company will make better investment choices than shareholders. There are many stakeholders in a company other than the shareholders and directors, and prudent and effective company management requires the company to be managed in a manner that properly reflects and balances all of these interests.REQUIRED:(10)(b)