Question 3 In practice financial managers should make decisions that are consistent with the primary objective of maximizing shareholder wealth, yet whether this philosophy is consistently applied is open to debate. Critically evaluate and analyse the differing ways in which the shareholders of a company can encourage its managers to act in a manner that does align with the objective of maximizing shareholder wealth. Within this section of the assessment students should demonstrate knowledge, understanding, and an ability to critically evaluate agency theory, and the pivotal role it plays within financial management. The response should clearly identify techniques that can be implemented and used by shareholders to address and reduce the agency problem that is faced by many businesses. A critical evaluation of relevant, contemporary academic literature should be performed, rather than placing an over emphasis upon overly describing the core concepts. Evaluation and integration of real-life examples where shareholders have actively attempted to address or reduce agency problems would assist in developing and enhancing the response offered.