|
Abiodun
|
Agency Theory: Principal-Agent Problems
I need to understand the principal-agent problems that arise in organisations. Thanks...
X
Welcome to the Corporate Governance best practices.
The topic of this particular best practice is: "Agency Theory: Principal-Agent Problems".
Please register now to read all responses and to join this discussion yourself.
Log in
| |
|
Bruno
|
|
Principal Agent Problems
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.
|
| |
|
Mutasa
Turnaround Manager, Zimbabwe
|
|
Agency Theory: The Principle-agent Problem
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.
|
| |
|
Obert Chinhamo
Director, Zimbabwe
|
|
Principal-agent Problems in Agency Theory
Reading more about the agency theory of corporate (...)
|
| |
|
Jaap de Jonge
Editor, Netherlands
|
|
List of Agency Problems
Boot and Cools (2007) mention the following 8 cate (...)
|
| |
|
K.Narayana Moorthy
HR Consultant, India
|
|
The Agency Theory and Principal-Agent Problems
The Agency Theory enunciates reactions between the (...)
|
| |
|
Michael Holford
Project Manager, South Africa
|
|
Agency Theory: Continuing Conundrum!
Whether from a private of public perspective, rela (...)
|
|
Sign up
Start a new forum topic