List of Agency Problems
Jaap de Jonge, Editor, Netherlands
Boot and Cools (2007) mention the following 8 categories of agency problems in the relationship between shareholders and management:
A. The inclination to inefficient management
, because substantial cash flows become available periodically, which leads to insufficient discipline in investments and purchases (for example empire building).
B. Perk consumption
: the appropriation of dubious fringe benefits and facilities.
, due to managers being risk-averse: why take risks if this could jeopardize our own position?
D. Taking Excessive risks
(risk shifting, gambling) after the firm is already in financial distress.
, trying to influence the stock markets
by management and/or lacking 2-way relation between compensation and performance.
of managers, leading to risky acquisitions
H. Narcissistic behavior
, attested by an overly positive self-image and surrounding themselves with 'yes-men'.
Source: Boot, A. and Cools, K. (2007). "Private equity en activistische aandeelhouders: Bestuur onder vuur". Preadviezen voor de Koninklijke Vereniging voor de Staathuiskunde, Amsterdam)