Opportunistic Managers are those managers who have self-serving bias and do some things favorable to their own interest instead of company’s interest.
Managers in a company are generally well aware of the company’s operations and investments, in case of investment firms. So, whenever they get chance to multiply their wealth or have any kind of personal profit, they forget company’s interest and objectives.
Opportunistic managers either benefit themselves or their relatives/friends from inside information of the company.
Managers serving their own interest is a common agency-principle problem. In agency-principal businesses, managers are the agents and owner is the principal. The job of the managers is to multiple owner’s wealth but many times the managers could not align themselves with the principal’s interest and focus on multiplying their own wealth instead. This generally happens if owner does not participate in managers’ performance evaluations or regulations. No monitoring or avoidance can lead to loss of business.
This problem can be tackled by ways like:
1. Sharing profit with employees: If the profit is earned by managers’ work and it is shared as per profit margins to the managers, it will keep them motivated to work more in company’s interest. Managers would think to increase company’s wealth if it would have direct impact in their salary.
2.Monitoring of managers’ work: Monitoring of mangers’ or agents’ work can create questions on decisions taken more for self-interest than company’s interest by the managers or agents respectively. The fear of being caught can restrict them from doing so. Hence, owner or board of directors or whoever is the lead holder of the business should monitor managers time to time.
Example of Opportunistic managers:
A manager is named as Mr. John and working in company X. This the end of financial year and evaluations of earrings and profit is going on in company X. The more profit a unit has earned, the more hike the manager of that unit would get. Mr. John twist the numbers in the financial report of his unit just to earn get hike, although it is misleading for the company.