An Agency Problem within a Firm and the Causes of the Problem
Agency Problem is a term used to refer to the conflict of interest which exists between the management of a company and the stockholders of the company. …
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However, if the managers fail to do this and instead satisfy their appetites of making themselves their own wealth, then we have an agency problem.
The ‘agency problem’ has been in existence as long as capitalism has been. Ferguson (2004) gives a very good account of the how long the problem has been in existence. In the eighteenth century, East India Company one of the world’s first corporations, did business in India while its major shareholders lived far away in London. In as much as the shareholders tried to exercise their control of the business, they could not because of the limitations associated with communication systems. Messages were carried by ships to and from the destination. More often than not, it would take half a year to get messages from Calcutta to London and the same period of time to get replies from London to Calcutta. The expatriate agents; the managers the shareholders put in place to run the business for them out rightly ran their own businesses not taking into consideration the interests of the shareholders and of the company as an entity. ...
Description of the Company Boeing is by far one of the most successful plane manufacturers in the world. However, it has had its fair share of problems. In organizations where the matrix management structure it utilized, it is important that communication be prioritized as the key that leads to success. At Boeing, communication lines flow, often more freely with the matrix structure hence allowing for an increase in accountability from both the project teams as well as the project managers. The matrix structure the company uses ensures that each and every one of the companies departments has a vice-president. The departments are as follows: Communications department Business development and strategy Operations, engineering, and technology Internal governance Finance International Public policy Law department Human Resources and administration The company uses specialization. This means that there are different individuals who are in different units and who perform very specific tasks in their areas of work. There is an executive council; there is the commercial airplanes department, a capital corporation department, shared services group, integrated defense systems department, and lastly the Engineering, Operations, and Technology department. The company also relies on Corporate Governance; the executive staff as well as the board of directors oversees the firm and its operations. The board of directors and the executive staff use integration in running the organization. The Agency Problem and Boeing Boeing’s agency problem is one of the examples of the form the problem has taken in modern day capital market. Boeing had
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From the research, it can be comprehended that the onslaught of the economic crisis and the expectation that it will experience enormous budget deficits in the near future has prompted the increased rigor in the reform of America’s entitlement programs. If left unreformed, the Social Security system will be depleted of financial resources as the life expectancy of the current generation increases.
The FEMA usually takes over as soon as a state of emergency is declared by the governor of the state; the formal request of the governor expressed to the president would authorize the FEMA to respond to the disaster (FEMA, 2012a). Where the disaster or emergency occurs in a federal building or to a federal resource, the request from the governor would not be needed.
n This paper is an ample discussion on the agency problem faced by both the multi-national as well as domestic companies, especially banks. The discussion will mainly be focused on the agency problems faced by multinational companies and their level of difference from those of the domestic companies.
Name: Course: Date: Management problem Business planning is the core function of any management team of a business entity or organization. Lack of planning in any business would mean that the business is being run without a direction and without any intended objectives to be achieved.
Not only has the private sector given importance on managing business but other types of organizations (NGOs, public sectors) also give importance on this subject. Business management is important to counterbalance any types of organizational disruptions or inconveniences.
In accordance with the issues discussed in the paper we all are somewhat bound and restricted by the constraints of our surroundings and its contexts. At the same time, we as moral beings should also make sure that we exercise our power/choice to act in a responsible manner by taking the right path.
Employee’s attitudes towards work, communication system, disagreement, etc., are among the factors that should be considered in managing and supervising people. A high level management performance would be useless if the leadership skills
The conclusion from this study states that the agency theory, besides a number of its weaknesses provides an approach through which the corporate governance problem can be solved. The theory proposes that to settle the conflicting interests of the shareholders there is need to reinforce the control systems by setting up an independent board structure and composition.