Final answer:
Top executives like the CEO and COO play a crucial role in shaping the strategies for a company and they have significant influence in nominating board members, impacting the governance to align with shareholder interests.
Step-by-step explanation:
Holding positions such as CEO (Chief Executive Officer) and COO (Chief Operating Officer), top executives establish the strategies that guide the entire company. In theory, the board of directors helps to ensure that the firm is run in the interests of the true owners—the shareholders. However, it is the top executives who run the firm and have a strong voice in choosing the candidates who will serve on their board of directors.
As the company becomes established and its strategy likely to lead to profits, the knowledge about the individual managers becomes less essential due to more widely available information regarding the company's products, revenues, costs, and profits. This availability of information makes other outside investors, like bondholders and shareholders, more willing to provide financial capital to the firm without a personal knowledge of the managers.