"(m)uch of corporate America's governance problem arises from the fact that neither managers nor board members typically own substantial fractions of their firms equity." What do you think about this observation? Would corporate governance improve if managers and/or board members were required to have a significant financial stake in their business? Would such a requirement pose any ethical dilemmas for managers and board members? If so, what are the ethical dilemmas that might arise? What policies/procedures could be put in place to mitigate any potential brech of ethics?
Managers and Board Members do not own (and are actually not allowed to own in most cases) many shares of the firms equity. Although sometimes shares are given as incentives or honorariums to these members or as an addition to salary or to pension plans, many Articles of Incorporation or employment agreements limit the number of shares these members can have. There is a specific reason for this so that the managers nad board members do not take unncecesary risks with the firm and don't make decisions that are not for the firms best interests but rather are for the best ...
The ethics for managers the board of directors in corporate shares are determined. The policies and procedures which could be put in place to mitigate any potential breach of ethics is determined.