Golden Flake and Corporate Governance

Golden Flake and Corporate Governance

Over the years Golden Flake has struggled to maintain pace with major corporations such as Frito Lay. This uphill battle verse their competition has forced Golden Flake to branch out from your typical potato chip flavors, narrow down their scale, and focus more on their direct target audiences' tastes. Golden Flake also deals with another major problem which affects not only profitability within the organization but the financial state and condition of Golden Flake as a whole. One of the main financial characteristics that Golden Flake possesses is the fact that one family, the Bashinsky's, owns a total of 52% of the total stock. Golden Flake operates under a concentrated form of ownership structure, as opposed to one which is diffused. This means that a large portion of the shareholders is controlled by a single party. Such a large portion of shares being controlled by one entity offers a varying array of benefits but a fair share of downfalls as well.

First of all, Golden Flake is a very "dividend-driven stock". Investors who have embraced the company rely on high profitability and expect high return on their investment. One of the main benefits of working in attempting to satisfy such a concentrated ownership structure is the fact that the people so heavily invested will likely be paying more attention to detail, as well being more willing to satisfy any needs that may arise as quickly and efficiently as possible. Some companies prefer this government mechanism due to the fact that the ownership's interests are best represented. When a company is more diffused the shareholders may not be as keen or up to date on the current financial state of the company. However, having one large shareholder so reliant on you does make for added pressure to maintain or increase dividends.

Operating within this concentrated type of structure makes it essential that the shareholders and the top-level of management have a positive relationship. They must be operating on the same page and have similar goals and interests. In the Golden Flake example the Chief Executive of Golden Flake Mark McCutcheon must be sure that he is satisfying the Bashinsky family using a way and a strategy which they agree to. These set standards and corporate governance strategies are essential to the well being of a strategy. If there was no corporate governance mechanisms in place, companies would be in a state of misunderstanding between the shareholders and the managers of the company. This type of disorganization would lead to a wide amount of miscommunication, distrust, and confusion between these two important upper tiers of a company.

On paper, the idea of concentrated corporate mechanisms sounds like a great idea. More attention to detail from ownership, less room for managerial error, and better representation of ownership through the company are all