The Interests Of Professional Managers

The capital suppliers of corporate part with their money,and have little to contribute to the enterprise afterwards. It is the professional managers who run the firms. The conflict of interest between shareholders and professional managers is a classic example of principal-agent problem. The interest of professional managers should be respected. Though this is a classic economics topic,the compensations of managers benefits is too small to incentive them to pursue shareholders' maximum interest. This is also essential to the benefits of all stakeholders of modern corporate. In this dissertation,we argue the legal protection and the realizing mechanisms of the interest of professional managers.The economics arguments about the independence of Senior managers' interest based on followings. Top management holds the firms' high position. They are entrepreneurs with prominent and special human capitals,the financiers needs the managers to generate the returns on their funds. They hold the rights of corporate control and bear the firms' risk,Their human capital might be useless when leaving the company. There are also several schools of modern firm theory,which sustains this view.Using the techniques and achievements achieved in the Game theory and Economics of Information,chapter 3 set up a model. It has proved that the more the large stockholder holds firms' stocks,the more the professional managers can share the residual claimant right,and as a result,the agents may turn to self-dealing behaviors to gain the private benefits of corporate control. It is also proved that to develop the managers market will be favorable to the benefits of principals,the equilibrium of incentive contract is also determined by the agents' risk aversion.In chapter 4,we distinguished with the internal and market mechanism of corporate governance,we studied the role of managers market,on the professional managers interest,we also talk about the role of financial intermediaries in corporate governance,Product market competition is probably an effective powerful force toward the corporate governance efficiency . Chief Executive Officials achieve their interest based on the control of firm,The right of corporate control could be valued,If managers can not receive enough benefits as the other investors,then shares with -superior voting rights trade at a premium. So theprofessional managers will try their best to entrench themselves and stay on the job even if they are no longer competent to run the firm.Generally manager' s work can not be measured shortly,this characteristics requires diversified tools with them managers receive their interest. It is showed that,on average,managers receive very little compared to each increase in shareholders wealth,while salary,bonus,stock option,inside stock ownership,threat of dismissal and etc. Give the managers manifold incentives and restrains.Sampling three hundred and twelve listing companies' financial reports of 1997,1998,we find that the director and CEO' s inside stock holding is too small and it almost do not plays any role in providing managers incentives and restrains;On average top management receive only a few income;It should be noticed that most of top management(including directors,senior managers )didn' t receive any payment from the firms. We can' t find any relations between those above variables and the firm' performances,this might be the most important finding of our surveys,it shows the undeveloped governance structure of firms in China.