Tor plc is a large company listed on the main market of the London Stock Exchange. The

Question:

Tor plc is a large company listed on the main market of the London Stock Exchange. The objectives of the company, in the current year and in recent years, are stated by its Annual Report to be as follows:

(1) To maximise the wealth of our shareholders.

(2) To give shareholders an annual return of 15 per cent per year.

(3) To increase real dividends by 4 per cent per year.

The shares of Tor plc are owned as follows:

………………………………............…..%

Chief executive officer……….….17

Managing director……………..…..6

Other directors………………....…...4

UK institutional investors…….…44

Foreign institutional investors…..10

Small shareholders………….......……19

……………………………....................……100

The following information relates to the recent performance of Tor plc.

Average values for 20X9 for Tor plc’s business sector are:

Dividend yield………………………........……………...4.2%

Total shareholder return…………………………….35%

Price/earnings ratio…………………………..…..14 times

(a) Using the information provided, evaluate the recent performance of Tor plc and discuss the extent to which the company has achieved its declared financial objectives.

(b) Critically discuss how the problem of agency may be reduced in a company listed on the London Stock Exchange, illustrating your answer by referring to the information.