Question 1
There are three main internal government mechanisms including ownership concentration, executive compensation, and boards of directors. An analysis of the three reveals a number of essential elements. First, ownership concentration entails the total stock amount that is owned by both the shareholders and the investors. On the other hand, the board of directors consists of elected members in charge of overseeing the general activities of the company. Finally, there is executive compensation. In this case, executive compensation refers to both financial and non-financial rewards that the organization received due to their efforts (Blanpain, Bromwich, & Agut, 2011).
In order to help align interest of managers with those of the owners of the firm, a forth mechanism can be recommended. Particularly, I would recommend board effectiveness. In this case, the board of directors can demand better performance from the organization; being open to suggestions and seeking accountability. Consequently, a better link is generated between the managers and stakeholders.
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Question 2
There are a number of corporate governance challenges that might face Best Buy due to its rapid growth. First, there is the issue of misappropriation. In particular, while prices of shares declined, the company still maintained high values of executive bonuses. This could become a corporate governance issues since it puts shareholders against managerial agents, due the lack of accountability. Other than this, there is also the lack of transparency evident in purchasing company requirements (leasing aircrafts) from the company chairman (Lee, 2013). In this case, there is a conflict of interest which could lead to corporate governance issues. The company needs to align its activities in favor of both managerial agents and shareholders so as to avoid such conflicting issues.
References
Blanpain, R., Bromwich, W., & Agut, G. C. (2011). Rethinking corporate governence: From shareholder value to stakeholder value . Alphen aan den Rijn: Kluwer Law International.
Lee, T. (2013, April 24). Best Buy moves to bolster corporate governance. Retrieved from http://www.startribune.com/best-buy-moves-to-bolster-corporate-governance/204392901/
