Discussion of legal strategies in the law assignment to overcome the agency problems between shareholders and employees
Question
Task: Can you write a law assignment on the legal strategies to overcome agency problems between shareholders and employees
Answer
Introduction-
Corporate governance mainly demonstrated the internal relationship within the workplace environment to reduce the risk related to agency. In addition, agency problems mainly created conflict related to agency finance and others that can minimise shareholder engagement. Developing legal awareness regarding principal-agent relationships through problem-solving activities within the workplace can maximise revenue growth. The legal advisory can provide the basic idea about improving employee management through developing their motivation within the workplace by providing performance-based compensation. In this scenario, the present law assignmenthas intended to analyse the legal interventions for reducing agency problems to emphasise the relationship between shareholders and employees. As a result, the law assignmenthas analysed the commonly experienced issues in the workplace and their impact on social perspectives. In order to mitigate the negative impact of agency issues from a social perspective, the present law assignmenthas provided ideas related to legislative interventions.
Identifying the issues commonly experienced in the workplace between shareholders and employees in the law assignment-
Importance of understanding shareholder’s right
Shareholders play a significant role to accelerate revenue growth by contributing innovative ideas to research and development strategies. It has been reported in the law assignmentthat shareholders possess rights related to authenticated ownership of organisational decision-making. Moreover, shareholders holders also obtain rights related to members of the board of directors and certain issues as well. Demonstration by the government of the UK has showcased in the law assignmentthat shareholders have at least 5% right to the college General Meeting and provide required resolutions for the Annual General Meeting Asphalt the demonstration of Corporate Act 2006 Section 314. Along with this shareholder can contribute their decision in preventing more than 25% of special resolution . Corporate Act 2006 section 338 has showcased that shareholders have a strong presence in voting purposes and to get at least 100 GBP. Moreover, shareholders can enforce decisions against any third-party involvement to maintain the revenue generation of organisations as per the Contract Act 1999.
Importance of understanding employee’s rightin law assignment
According to the law assignment employees are considered the fundamental strength of an organisation to develop their business perspective with high revenue generation as a result of performance management. Lack of employee satisfaction and a non-transparent workplace environment reduce productivity and profitability due to a lack of leadership skills. The UK government has demonstrated that employees obtain the right not to work more than 48 hours per week . In addition, employees also pose writs related to protecting against an unlawful deduction of wages. Along with this employees also have the right to request flexible working hours to get the required help and mental stability as per the findings of the law assignment. The Employment Rights Act of 1996 has been built to protect the basic demands of employees. Moreover, section 63a of this act has represented the employee’s right to get remuneration for time off .
Internal conflicts
Evaluation of these aforementioned segments has highlighted that both shareholders and employees have rights related to interpreting their demands as per situational maturity. Shareholders' contribution in affecting the fundamental rights of employees within the workplace regarding working hours paid leave and others can create internal conflict within the workplace. Inadequate understanding of defined benefits within the workplace mentioned in the law assignmentcan affect the resource evaluation and Research allocation for profit generation . Excessive working hours can be considered as one of the most significant issues for creating workplace conflict between the shareholders and employees. Along with this discrimination in paymentscales based on gender culture nationality and others can reputation of the organisations as well. It has been reported in the law assignmentthat Tesco has witnessed issues related to the strike for equal pay fight which was covered by the international news channel BBC . As a result, it affected the brand reputation of this organisation in front of the whole world. On a contradictory note, wrong demands of the employees also can create conflict within the workplace that can reduce organisation productivity and profitability as well. In that case, a lack of legislative intervention knowledge for employment relationships and organisation and phenomenon to formulate the application of national policy can develop workplace sustainability in this present scenario.
Critically analysing in the law assignmentthe impact of inadequate workplace environment on the social scenario-
Improving the understanding of employee relationships and corporate governance is able to develop profitability in this present scenario. Degradation in productivity rate can impact the annual GDP growth of an economy that can increase the rate of recession. As a result, it can affect social stability and employment rate as well. It has been identified in the law assignmentthat efficient employee management is considered the key element of the economic recovery program in this present scenario. It has been demonstrated in the law assignmentthat a lack of psychological stability within the workplace highly impacts the dedication toward excellent management. The theory of total quality management has highlighted that developing collaboration within the workplace by supporting commitment between shareholders and employees can create quality improvement culture . As a result, continuous development in rapid innovative ideas can help organisations to focus on customers' requirements. In the law assignment case, developing customer relationship activity based on the customised demand can improve revenue generation activities. As a result, it can accelerate the GDP growth of an economy.
It has also been reported that the development of employment relationships can clarify the need for adopting innovative ideas for eliminating regulatory hazards along with Scope development. Moreover, the establishment of ideas related to monitoring development can formulate a strategic relationship within the workplace for developing productivity that can improve revenue generation as well . On a contradictory note in the law assignment, a lack of employee management activities within the workplace also hampers the social life balance of the employees. As a result, a lack of emotional intelligence within the workplace can create an imbalance between personal life and workplace management as well. In addition to the law assignment, development in cultural understanding within the workplace is able to improve corporate governance for developing decision-making for employees' welfare and shareholders' welfare at the same time. As a result, supporting the commitment between the employees and shareholders can accelerate the GDP growth of an economy that can develop social stability as well.
Demonstrating legal interventions related to relations between shareholders and employees
To protect the rights and interests of the employees about the shareholders, organisations take a holistic approach to Corporate governance (CG) structure to analyse the directives of their relation according to the law assignment. Since the commencement of the separation of control and ownership in such corporations, the shareholders are increasingly associated with agency theory that supports the obligation of employees in the best financial interest of the stakeholders. The employment relationship is demonstrated as the legal link between the employees and shareholders that exists when an employee performs work of services under defined conditions in return for the remuneration received from the shareholders indirectly. According to the UK Corporate governance code mentioned in the law assignment, the shareholders must keep informed about the latest developments and consult with the employees on major issues of interest without recognising them in a privileged position . Within a corporate firm, the code encourages the stakeholders to conduct annual general meetings to discuss the ideas and generalizations of the organization in front of the employees to overcome workplace issues. It is the legal right of the shareholders as per the law assignmentto protect the employees from discriminatory acts that persist on issues of age, gender, race, sexual orientation, religion, and national origin under the Equality Act 2010 . The shareholders need to enforce a sustainable relationship with the employees by protecting their personal information of the employees and not disclosing it to external sources without approval. In return, the employees have the legal right to seek legal counsel if they feel their rights are violated by the shareholders under the federal or state law of the UK. Another major legal intervention between the shareholders and employees mentioned in the law assignmentis shareholder dispute that might tend to spark a shareholder backlash against the employees and can lead to poor employee engagement rate as moving the businesses. Within the fiduciary misdeeds, the shareholders might not behave openly and honestly that can further cause conflicts of interest with the employees. It is under the Companies Act 2006 that typically exercises the power of shareholders to behave friendly with the employees to curtail the negative impact of workplace issues . A central legal implication lies in the contemporary corporate law that enacts the effectiveness of shareholders as monitors for employees’ interests. Therefore, agency issues in the organisation need to be avoided to enforce a smooth control over the relations of shareholders and employees.
Analysing the strategies to overcome workplace issues between shareholders and employees
Remuneration and benefits
Pay is often regarded in law assignmentas the legal strategy to dissipate workplace issues as it is a common source of conflict. The payment of dividends under the UK Corporate governance code is the legal right of the shareholders to approve the payment of bonuses and salaries of employees. Shareholders need to maintain the balance of power and decide on the salary levels and bonuses that might affect the level of dividends in the organisation directly and incur a high bonus as per the employee’s interests. To some extent, there should be a legal agreement between the shareholders and employees in relation to the spending decisions of the organisation as they can mutually reduce the cash available in the business.
Using budgets and business plan
A significant way of overcoming workplace issues due to agency problems between the shareholders and employees can be through the involvement of budgets and business plans as per the law assignment. It is common under the legal enactment of Companies Act 2006 that shareholders can agree a budget for a short time in advance to the meetings held in front of the employees without having to return the spending amount to the shareholders. The process of authorisation of the business plan according to the law assignmentshould be duly maintained with Corporate Act 2006so as to set out the spend over budget in the shareholders' agreement through a special meeting and must involve at least 50% of the employees in such considerations.
Clarity of decision-makingin law assignment
A robust legal strategy entitling the shareholders agreement must be in the directives of decision-making in case of any special meeting or agency discussions. It is under the basic rights of the employees through Employment Act 1996mentioned in the law assignmentthat states the jurisdiction of employees working 48 hours per week . Clear decision-making in the organisation structure is beneficial to maintain a proper governance framework as shareholders' need to be precise about the job description and limits of decision-making of the employees from prior. In order to cut out the agency problem experienced in the corporate firm, the shareholders also need to clarify their responsibilities in the organisation and must state whether notification is required for any chances in the decision-making structure.
Attaching managerial compensation to performance
Involvement of restructuring the remuneration scheme of the organisation is utmost important to enhance the alignments of the shareholders interest to that of the employees for superior performance. The remuneration scheme mentioned in the law assignmentand overall bonus structure should be made clear according to Corporate Act 2006 to prevent more special resolutions in the organisation. Such compensation schemes can encourage employees to do their best work alongside fixed pay and achieve the goals or objectives of the organisation by cutting down agency problems in the corporate structure .
Conclusion
In conclusion of the law assignment, it can be stated that shareholders' rights related to authentication or ownership are vital to influence organisational decision-making and enforce swift revenue generation with the solvency of employees. On the contrary, employees have an equal right to gain privileged resolutions and request for flexible working hours to get mental and professional help from the shareholders. Excessive working hour problems is dictated as a major agency problem for creating workplace conflict between employees and shareholders which can further lead to legal intervention. Involvement of sustainable legislative interventions is primarily important to formulate national policy of the workplace issues. Therefore as per the law assignment, better remuneration and clarity in decision-making from the prior basis is of utmost importance to influence the workplace environment on the social scenario of employee stakeholder relationship activity.
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