One does not need to refer to WorldCom, Enron, HIH, Qintex and scores of other profound examples of malfeasance, greed, theft, egotism, connivance, deceit, nepotism, scandal and ineptitude to accept that not all management acts in the interests of the corporation, let alone the interests of the shareholder.

There are many inescapable facts that managers, directors, shareholders, brokers and analysts must acknowledge:

1.          Managers are human beings.

2.         As human beings, they have perspectives, attitudes and perceptions that are unique to their personality, experience and context.

3.         As human beings, most frequently they are attracted by security and shy away from fear, insecurity and confrontation.

4.        Within the corporation, the implications of decisions and actions are not all uniform and predictable.

5.         Decisions that are unpredictable lead to enhancing insecurity and are therefore less preferable.

6.        Managers, like other mortals, pursue self-preservation.

7.         Managers, to “protect themselves”, are less likely to make decisions that are higher-risk and that threaten their security within the organisation. 

8.        Some organisations occasionally need to take higher risk decisions.

9.        Managers, because of their own human nature, may fail to make the decisions that are in the best interest of the organisation and therefore the shareholders.

10.      Management through its own subjective filter interprets and decides what is in the best interest of shareholders.

We also know that frequently CEOs choose directors who will serve the CEO’s purposes rather than provide the organisation with the dispassionate and independent adjudication and direction expected of the Board. Self-seeking behaviour therefore stretches from the bottom to the very top of most organisations.

Beware of the manager or director who passionately believes that his/her organisation is an entity apart from its owners. These people argue that “shareholders are merely investors and if they don’t like what they get from their association with the company they can leave and go to another company.” You show me a company with this view and I’ll show you a company that is not only not satisfying is shareholders, but is heading toward oblivion.