Although managers may have different goals from shareholders they are still subject to control. At one extreme, legal constraints should prevent management defrauding the shareholders or running that company in a clearly negligent fashion.
The composition of the board of directors will also have a clear influence upon its effectiveness. Within this context, non-executive members of a company’s board (see Chapter 2) are seen as providing a degree of independent scrutiny and should help ensure a company is run responsibly and in the interests of its owners. Such non-executives are usually part-time appointees, chosen for a variety of reasons including their knowledge, skills, contacts, influence, independence or previous experience. The mini case at the end of this section – Non-executives: are you independent? – provides an analysis of the role and responsibility of such non-executives.
Other constraints upon managerial behaviour would include the following