Ethical Aspects in the Separation of Ownership and Control - Case Study Example

Abstract

The separation of owners and control is referred to a situation where the shareholders have little or no direct control over the management of the organization. This is considered to create some problem regarding collective action as the ownership between the shareholders might differ. The prime benefit of separation is the decisions that are made by the competent managers are quite effective and superior to that of market. The moral hazards as well as adverse selection of incompetent managers are treated as the prime cause of cost associated with the separation. There are however some of the mitigation processes which reduce the costs of separation. Such process includes enactment of corporate laws, linking the manager’s incentives with that of the share price of the organization and establishment of institute of business control.

Contents

Introduction4

Analysis4

Recommendation9

Conclusion9