Bao owns 10% of the ordinary shares in XYZ Joint Stock Company, a shareholding company. Having read the annual report of the company he is angry that the Board of Management has awarded signifi cant pay increases to five key senior employees on the basis that they have developed new products that are expected to contribute substantial profits in the next fi ve years. The products are still under development and will not be launched until next year. The company is proposing a reduction in dividends for the current year in order to provide extra capital for investment in the new products, even though the company’s profi ts have increased signifi cantly over those earned in previous years.Required:
(b) Explain the extent to which Bao and his fellow shareholders can infl uence the dividend distributed to shareholders. (4 marks)
