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Discuss 5 major conflict between management and shareholders that can affect the performance of firm.

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Did you know that conflicts between management and shareholders can greatly impact the performance of a firm? There are 5 major areas where these conflicts often arise: 1. Dividend Distribution: Shareholders may want higher dividends, while management may prefer reinvesting profits into the company for growth. This conflict can affect the firm's ability to attract investors. 2. Executive Compensation: Shareholders often seek to align executive pay with performance, whereas management may desire higher compensation packages. This conflict can negatively impact the firm's profitability and overall corporate governance. 3. Strategy and Risk-taking: Shareholders may have different risk appetite and preferred strategies than the management. Diverging opinions on the firm's direction can lead to inefficiencies and decreased performance. 4. Board of Directors: Shareholders may want a stronger influence on the selection of board members, while management may prefer to maintain control. This power struggle can lead to conflicts over accountability and decision-making. 5. Transparency and Disclosure: Shareholders value transparency and timely disclosure of relevant information, while management may wish to keep certain information private. This conflict can erode trust in the firm and affect its reputation. Awareness of these major areas of conflict is crucial for shareholders and management alike, as understanding and addressing these issues can help to ensure the long-term success and prosperity of the firm.