The duties as also rights have led to directors and managers owing fiduciary duties to the shareholders, particularly loyalty, duties relating to care as well as condor. The failure to these duties enables the shareholders to sue the directors and managers to "stop certain actions from occurring or for damages stemming from actions that were not in the interests of shareholders. State corporate law, therefore, attempts to better align the interests of managers and directors with those of shareholders by imposing various obligations on managers and directors and then penalizing them if they fail to meet those obligations." (Edwards; Burns, 2003)

The third mechanism relates to the executive compensation. Here shareholders or the elected board of directors decides the structure of compensation. In addition to that the compensation is to be based on the stock performance of the company. These mechanisms are supported by two concepts commonly known as the...
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