Agency Conflict in Companies - Essay Example

Dennis Kozlowski transformed the compensation committee-approved relocation program for all employees and turned it to be a special program for senior executives without board approval. He also held a $2miillion birthday party for his wife and charged half of it to the company.

These instances led to agency conflict since the shareholders did not agree with his moves and later led to his resignation.

Question 2

A Golden Parachute is an agreement between a company and an employee of that company such that the company will offer significant benefits if the employment is terminated because of a merger or takeover.

It is an example of an agency conflict as the agents (managers) use this agreement to pay hefty pay-outs to executive members of the company in conflict with the interests of the principal (shareholders or BOD). Recently, there have been increased cases of a severance agreements. According to Handler (2006), mergers and takeovers have also increased with the high economic demands, leaving companies with no option, but to pay employees these benefits.