Question

Risk is a major concern of almost all investors. When shareholders invest their money in a firm, they expect managers to take risk with those funds. What do you think are the ethical limits that managers should observe when taking risk with other people's money? If you were an investor in a firm, what would you expect from the managers? Constant communication? Dollar limitations?

Answer 1

Answer with explanation:

Investments themselves are risky. There are only two outcomes: lose or win. From a point of view of a manager handling shareholders' investments, it is important to come up with plans that must drive those funds to increase. Though, those plans must only be communicated to the shareholders right before there is a need to select at least one. For the shareholders, it is irrelevant to be in touch with the managers for every single decision they need to take. That is the job of the manager. But, for a major decision that could determine the success or failure of the company, it is imperative managers set up a meeting with the firm's investors. More than dollar limitations, it is dollar allocation. Distributing the investment funds properly according to the expected return is also a duty managers have to deal with.