Tongaat Hulett

Earlier this year, South Africas biggest sugar producer, the 127-year old Tongaat Hulett, admitted that certain past practices do not reflect the company's business performance accurately.

The company said equity (the value of the business after liabilities) in its 2018 financial results has been overstated by between R3.5 billion to R4.5 billion. Analysts believe its property portfolio, in particular, was inflated. An external report has blamed ten former executives, including ex-CEO Peter Staude, who was paid more than R170m in a decade.

Its shares remain suspended on the Johannesburg Stock Exchange (JSE) and in London.

Required:

Indicate why agency problems exist between management and shareholders. What factors will ensure an alignment between the objectives of shareholders and management? (10)