AGENCY PROBLEMS AND ACCOUNTABILITY OF CORPORATE MANAGERS AND STOCKHOLDERS.

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Presentation transcript:

AGENCY PROBLEMS AND ACCOUNTABILITY OF CORPORATE MANAGERS AND STOCKHOLDERS

When does Agency Problems occur? When the interest of stockholders, the board of directors/or the management of the company are not perfectly aligned or when these entities conflict.

It is a relationship that came into being occasioned by the existence of one or more individual called principals, employ one or more individuals called agents, to carry out some service and then entrust decision making rights to the agents

PRINCIPAL-AGENT SPECIFIC ISSUES Diversification vs. Dividends Managerial Opportunism Power Supremacy vs. Technical expertise Trust

IDENTIFIED AGENCY PROBLEMS

Adverse Selection

EXTERNAL FACTORS AFFECTING GOVERNANCE Competitors Financiers Regulatory Agencies

Watchdogs Predator Companies Investment Bankers- an individual or entity which act as an agent for corporation issuing securities.

Stock exchanges-refers to an entity which offers trading services and facilities for stock brokers and traders, to buy and sell shares of stock and securities. Financial Press

ASSIGN: What is the stated mission of BSR (Business for Social Responsibility) Benefits of BSR How does the mission of BSR differ from that of Ideals Work?