Who is responsible for protecting and managing shareholders’ interests in South Sudan?
4 min readBy Solomon Gai, Kampala, Uganda
March 8, 2016 (SSB) — The standard shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties to protect and further his or her interests. These parties include the company’s employees, its executives and its board of directors. However, each one of these parties has its own interests, which may conflict with those of the shareholder.
The board of directors is elected by the shareholders of a company to oversee and govern management and to make company decisions on their behalf. As a result, the board is directly responsible for protecting and managing shareholders’ interests in the company.
For a board of directors to be truly effective, it needs to be objective and proactive in its policies and dealings with management. But the boards of directors has turn to the mismanaged of the company resources as the use all the assets for their own uses; these cannot helps to ensure that management is generating shareholder value. A more objective board of directors, or one that is separate from a company’s management, is more likely to promote or protect the interests of the company’s shareholders. For example, a board of directors made up entirely or primarily of management would clearly be hampered by conflicts of interest, and the preservation of shareholder value might not be a priority.
Another factor that has an impact on the effectiveness of a board of directors is compensation. Adequately compensating board members for their work is one way to ensure that they will make every effort to promote and protect investor interests or head of the company interest. The members of a board of directors are paid in cash and/or stock. Likewise, management and employees also need to be aligned with investors and this can be achieved through the compensation that both groups receive. This may include making both parties owners (investors) in the company.
When management and employees are also shareholders, they will be motivated to protect shareholder interests as their own. This helps to protect a company from mismanagement and weak employee productivity. Also, a bonus targeting system can be used in which employees and managers receive bonuses when certain goals are met. Such strategies help to align the interests of employees and management with those of investors.
If these groups are not aligned like the mismanagement of company resources, and use of assets for their individual interest than all of them needed to be investigate for misuse of company assets, if the one of them find guilty he/she will be accountable for case, with the interests of investors, major problems can arise and destroy shareholder value. The investor is ultimately responsible for reviewing company policy and governance as well as for the compensation of managers. Investors who feel that a company does not show an adequate level of commitment to shareholders can always sell their investment.
In this conclusion the paper attempts to explore the question of how to organize board composition in order to ensure responsible of leaderships for their accountability and if any one find that she/he is guilty on misuse of resources than he has to be accountable for it.
The author, Solomon Surprise John, is a Student of MBA at the Kampala University of Uganda and can be reached through his email: gai111@live.co.uk
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