Agency Issues, growth and SD

Every “Financial Management” textbook reads of the contratdicting interests of stockholders and that of the managment of the particular firm that stockholders invest in. The so called “agency dillema” is apparent in many big public firms where stockholders do not believe that management is acting as agents of the stockholders. In other words, stockholders do not believe that management act with the best interests of the firm in mind and is not maximizing shareholder value.
If we back up a bit to the behavior of investors it seems overwhelmingly apparent that stockholders invest in firms who they believe will grow, with greater future cash flows. More and more investors are in favor of moderate growth and look more into the future of firms than ever before, but the emphasis on growth is still hard.
But as we learn today from the lecture and class material, sustainable development preaches that there exists the posibility for companies to do well without growing. This is contradictory to the fundamentals by which investors base the investing decisions upon. If we, as future ecologically minded managers, after taking this class begin to make decisions that seemingly cap growth, we should be ready to participate in heated agency issues.
I am hoping that the following few days in this class can offer information on what it really means to cap growth, and how to do it while still being able to attract investors capital. As it stands, from the limited knowledge that I have, a strategy involving SD will exaggerate the risk of investing in the ecologically friendly firm, especially in the mind of the common investor.

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One comment on “Agency Issues, growth and SD
  1. renaud says:

    The solution to this dilemna is that maybe sustainability will be turned more and more as a competitive advantage and it will be a solution to what appeared as a risk.
    To confort this idea, a survey by Environics International revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks.

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