Ownership Corporate Governance Mechanism -Myassignmenthelp.Com

Question: Discuss About The Ownership Corporate Governance Mechanism? Answer: Introduction As stated by Aalbers (2017), financialization can be define as the increase in influence and size of a financial sector within a country. Financialization affects the overall industry as it increases the growth of the financial sector, which may affect the other sectors in the industry both positively and negatively. The main concern of this literature is separation of ownership, control of capital and perspective of shareholder value. Due to the changes in the modern entrepreneurial structure of organizations, the financial decisions within the firms and capitals are shared with other shareholders. The conflicting interest of managers and the shareholders is an existing problem even within the Oman Arab bank. Managers and Shareholders executive pay As stated by Clarke and Gholamshahi (2016), the agency difference between the managers and the shareholders could be mitigated by aligning their interest. This can be done by developing managerial labor market that are effective and by paying for the performance contracts. The data analyzed in the case of Oman Arab Bank it can be seen that the managerial payments have reached extraordinary levels if we consider the historical data (Oman-arabbank.com 2018). The reformation of international governance changed their focus to self-enrichment of managers after few corporate scandals like WorldCom and Enron due to the immense public outcry. The Oman Arab Bank has adopted theoretical literature, which examines both the economic and legal anticipations. When considering the argument of agency problems, the bank offers both political and historical perspective by keeping their focus on matching the social context with organizations public nature. Therefore, in modern organizational situation, the shareholders are considered to be reinters as they are completely detached from the assets of the bank. On the contrary, as opined by Lazonick (2017), the objective of the managers should be maximization of asset value of the organization in the stock market in firms owned by the stakeholders. The mangers in the Oman Arab Bank do not have ownership over the shares within the organization. However, they control all the shares of the bank. This has given rise to incentive problems between the principle owners and the managers within the bank. The company theory has shifted the power to the managers, which has also been accepted by the post- Keynesian economics theory. However, according to the literature of property rights post- Keynesian economics does not include the incentive problems. Even though, the managerial board has indicated that there has been steady growth in the market share and capital but the conflict between the managerial class and the capitalist class regarding the maximization of reinter is still very much present with the organization. Value maximizing manager from profit maximizing entrepreneur The two main issues in the companys financials have been identified by analyzing the case of Oman Arab bank and they are capital control and separation of ownership. This is linked with the value perspective of the shareholders. The company has a diversified portfolio of assets, which are owned by diffused shareholders within the organization that decreases the exceptional uncertainty of banks performance. This clearly highlights the managers cannot be disciplined by the capital market. On the other hand, as stated by Oman-arabbank.com (2018), previous post settlements are the reason for having the subjected the managers to discipline in Oman Arab Bank. This has guaranteed long-term labor rental wealth. In addition to that, managerial labor markets have been used for primarily disciplining the managers, which has been able to explain the viability of the companys diffused ownership of securities. By accepting the same concept the Oman Arab Bank has been focusing on providing a long-term view on the agency issues by providing arguments that corporate control can be maintained by implementing secular restructuring of the capitalism in America. Therefore, the bank had made sure that economic efficiency could be maintained (Palley 2016). This is crucial for sustainability of the capital market along with the survival of the capital society. At the same time, this will play a major role in restructuring of the overall economy, which is ensured by emergence of incompetent companies in the market. In order to make efficient interventions in the capital market, the bank efficiently monitors the leveraged buyouts. Thus, there is a development of contractual relationship between owners, production factors and managers by being within the limits of the efficient assets and managerial markets. Value Matrix of Shareholders: Risk Adjusted ROC and Added Economic Value Agency crisis is an issue, which has to be solved for maintaining the financial stability of the organization. Therefore, various financial economists have developed a theory, which considers the product and the capital markets as a viable unit of economy. The data on Oman Arab Bank states that it is important to have cost recovery in the product market and in the capital market, there are certain risk factors, which has recognized the return on equity as it attains priority in performance (Oman-arabbank.com 2018). Therefore, in order to survive the company is still focused competition in the product market as managers are still gathering risk adjusted returns in the security market from the proprietors. According to the shareholder value metrics, the financial literature contains all the detail elaborations of the financial performance of different companies in the security market. This falls under the category of capital market, that is efficient which is added with economic benefi t. Oman Arab Bank is facing issues in theoretical and practical aspect simultaneously as they are unable to anticipate the rate of return on capital, which is the target for the managers to attain (Admati 2017). The main reason for conducting this to ensure that is increase in wealth of the shareholders. In order to justify the level of executive pay, the philosophy of economic value added metrics have been contained. However, there is deviation in the real managerial behavior, which diverges from the theoretical concept that means that there is no relationship between financial performance and managerial pay. The bank has been able to recognize the fact the disconnection between executive pay and organizational performance is due to the managerial power structure within the company. These power structures mainly focused on the remuneration package that is equity based and is applicable for primarily the managers. Shareholder Value Principle as Solution to Agency Problem According to Mitchell et al. (2016), the alternate view for the US economy performance and prospects has been explained regarding shareholders value economics. It has been indicated by Oman Bank SAOC that shareholders value has diminishes its long- term competitiveness j the US economy. This is due to discouraging its managers to invest in the organizations research and development along with the available skilled labors. Moreover, the companys profit is not to be retained by the company for making any further innovative investment. The profits are distributed among its shareholders. A similar kind of criticism was also found from the post-Keynesian camp. The post Keynesian managerial from the perspectives of capital observes profit maximization through growth replacement for achieving to be modern republic company. Oman Bank SAOC further realized that implementing macro-economic policy through their managerial behavior would lead to lowers its shareholders value as compared to the p rivate investments. Oman Bank SAOC to attain maximum growth needs adequate investment. This would lead to increase in the capital accumulation effectively. It is also observed that shareholders value, which is driven by its manager, is not effective for growth and investment but in fact increases the income that is not attained through profit. As per Lozano, Martnez and Pindado (2016), selected banks from economies of four nations like France, Germany, US and UK are the main examples. Hence, it can be evaluated that financialization plays a considerable part in the accumulated slowdown in the economies. Whereas, the shareholders. Value driven managers effectively manage or control the organization like Oman Bank SAOC. The product market is thus affected and challenged due to the existing long-term competitiveness. From the keen observation of the relevant cases in the bank, it can therefore be said that raising the initiatives for corporate governance throughout the world is effective. The interest of s hareholders and managers is not related with the practice. Oman Bank SAOC further indicates that governance reforms act, which has been proposed by the management is a significant measures to discipline the mangers, when capital market fails. In UK, the government reforms were emerged after few of the business scandals, which included Baring Brother Companies and Maxwell. The bank effectively ensured that all the internal reforms in its present board structure helps in maintaining proper capital control. On the other hand, Oman-arabbank.com, (2018) showcased that internal board reforms are ineffective for maintain the companys and mangers views. Conclusion: The major objective of the discussion was therefore to analyze the financial management present within Oman Arab Bank SAOC. The management consultancy indicated that the value of the assets of the organization within the stock market should be the main focus f the shareholders and mangers controlled firms. The companys shares are directly not owned by the mangers . The organizational growth needs investment that would further result in adequate accumulation of the companys capital. Furthermore, it is also been investigated the value of the shareholders is driven by its mangers, who are currently least interested with the companys growth. The bank should therefore ensure internal reforms within its board structure so that proper capital control is maintained. References Aalbers, M.B., 2017. Corporate financialization.The International Encyclopedia of Geography. Admati, A.R., 2017. A skeptical view of financialized corporate governance.Journal of Economic Perspectives,31(3), pp.131-50. Basel ,2014.84th Annual Report. Bank for International Settlements. Bis.org, pp.1-246. Batt, R. and Eileen, A., 2013. "The Impact of Financialization on Management and Employment Outcomes." Upjohn Institute Working Paper 13-191. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/wp13-191 Bebchuk, L.A. and Spamann, H., 2009. Regulating bankers' pay.Geo. lJ,98, p.247. Clarke, T. and Gholamshahi, S., 2016. Corporate Governance and Inequality: The Impact of Financialization and Shareholder Value. InFinance and Economy for Society: Integrating Sustainability(pp. 27-55). Emerald Group Publishing Limited. 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