Agency Theory: Principal-Agent Problems

Corporate Governance
Knowledge Center

 

Next Topic

Corporate Governance > Best Practices > Agency Theory: Principal-Agent Problems

Agency Theory: Principal-Agent Problems
Abiodun

I need to understand the principal-agent problems that arise in organisations. Thanks... (...) Read more? Sign up for free
 

Please register now to read all responses and to join this discussion yourself. It's easy and 100% free.

Sign up for free     Log in


 
Principal Agent Problems
Bruno

Agency Theory refers to the delegation of work from one party to another.
The principal delegates work to an agent.
In the case of a corporation, the term of 'principal' corresponds to owners and 'agent' to directors.
Conflicts of interest can arise such as:
- The agent misusing his power for pecuniary or other advantage;
- The agent not taking appropriate risk in pursuance of the principal´s interests due to the dimension of the risk can be different between both;
- Information asymmetry can be another problem due to different levels of information they have.
 

 
Agency Theory: The Principle-agent Problem
Mutasa, Turnaround Manager, Zimbabwe, Member

I agree with Bruno. Adding to the detail, the result of such conflicts will typically be that agents pursue self serving interests, including personal enrichment at the expense of maximizing shareholder wealth.
The diversion of interests between principals and agents is the major problem in Agency Theory.
Eventually there will be a need to align the divergent interests of the principals and agents which in itself will be yet another problem.
 

 
Principal-agent Problems in Agency Theory
Obert Chinhamo, Director, Zimbabwe, Member

(...)
 

 
List of Agency Problems
Jaap de Jonge, Editor, Netherlands

(...)
 

 
The Agency Theory and Principal-Agent Problems
K.Narayana Moorthy, HR Consultant, India, Member

(...)
 

 
Agency Theory: Continuing Conundrum!
Michael Holford, Project Manager, South Africa, Member

(...)
 

         
Special Interest Group Leader

Interested? Sign up for free.


Corporate Governance
Summary
Forum
Best Practices


Corporate Governance
Knowledge Center

 

Next Topic



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2020 12manage - The Executive Fast Track. V15.4 - Last updated: 2-4-2020. All names ™ of their owners.