Agency theory - Essay Example

Comments (0) Cite this document
Summary
The de-facto owners of a corporation are the shareholders who cannot however participate in the day to day management. They have to necessarily entrust the…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER99% of users find it useful
Agency theory
Read TextPreview

Extract of sample "Agency theory"

Download file to see previous pages At this stage, agency theory is superseded by what is called stakeholder theory. The same not having been clearly defined, modern scholars advocate the theory called “enlightened stakeholder theory” which seeks to remove the shortcomings in the traditional stakeholder theory so that managers who could take shelter under the traditional stakeholder theory and avoid accountability, are now compelled to show performance for value maximisation in the long run. This is sought to be achieved by active participation of agents/managers through proper motivation and communication with a scorecard on hand. Thus the enlightened theory would go a long way in plugging the loopholes in the corporate governance occurring in spite legislations like Cadbury report, Greenbury report in the U.K. and SOX Act in the U.S.A.
Corporate Governance is a much-discussed issue of public importance, of late. One aspect of the issue is the corporate ownership and control which this proposal deals with. In the discussion here, the word ‘corporate’ is loosely described as firm, company, corporation etc, which all refer to public-owned companies listed in stock exchanges. Share-holder activism all over the global corporate environment has given rise to the study of corporate ownership and control and their impact on the performance of the corporates. By 1990 Corporate Governance had become a household name in the United States of America when a California based pension fund company “California Public Employees Retirement System’’ (CalPERS) that had invested members’ funds in the shares of leading companies, pioneered by questioning those listed companies’ practice of buying back shares from the share holders at higher prices which meant draining of companies’ capital and in turn reduction in value of shares held by them. This was soon followed suit by many contemporary companies representing widely dispersed shareholders around the world ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Agency theory Essay Example | Topics and Well Written Essays - 4000 words”, n.d.)
Agency theory Essay Example | Topics and Well Written Essays - 4000 words. Retrieved from https://studentshare.org/miscellaneous/1552248-agency-theory
(Agency Theory Essay Example | Topics and Well Written Essays - 4000 Words)
Agency Theory Essay Example | Topics and Well Written Essays - 4000 Words. https://studentshare.org/miscellaneous/1552248-agency-theory.
“Agency Theory Essay Example | Topics and Well Written Essays - 4000 Words”, n.d. https://studentshare.org/miscellaneous/1552248-agency-theory.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Agency theory

Agency theory and corporate governance

...of considerable evidences that split positions have yielded significant impacts on firm performance (Kwok & Shuk, 1998). Discretion is advised in the using of this scheme for the characteristics of a firm vary from industry to industry (Brockman et al., 2004). Conclusion Even though the Combined Code had produced ‘amiable’ results according to a few professional and academic perspectives, there appears to be a lack of adequate empirical evidence thus far as to the agency cost- reducing mechanisms that the Combined Code adopts. That is why, the principles in the code may not (for the time being) be able to transcend ultimate efficacy without the leverage of foolproof theories. The Combined code have only...
5 Pages(1250 words)Assignment

Comparing and contrasting agency theory and stakeholder theory

...? Comparison and Contrast Between Agency Theory and Stakeholder Theory of the of the of the or Institution Date of Submission Comparison and Contrast Between Agency Theory and Stakeholder Theory Introduction “Agency theory explores how contracts and incentives can be written to motivate individuals to achieve goal congruence” (Anthony, Dearden and Vancil, 1972, p.530). The theory identifies the main criteria to be taken into consideration in designing incentive contracts or incentive compensation arrangements. An agency relationship is established when one party: the principal hires another party: the agent to carry out a particular service, thereby delegating decision-making authority to the agent. In a corporation the principal... are the...
16 Pages(4000 words)Essay

Agency Theory and Corporate Governance

...? Agency Theory and Corporate Governance The objective of this paper is to evaluate the definition of corporation as a ‘nexus of contracts’ for interpreting its compatibility in the present modern business and thus to examine the importance of corporate governance. For the purpose of fulfilling the objective of this paper, the definition of firm as a nexus of contracts has been presented and its relation to the agency theory has been evaluated. It was found that the assumption of agency theory with respect to this definition states that self-interest of the individuals is the main basis of their wealth maximization. For verifying the...
3 Pages(750 words)Research Paper

Agency Theory and Corporate Governance

...? Introduction Agency theory is entirely an academic term and it defines the relation and conflicts between a principal and an agent. With the help of corporate governance any corporation and company can be managed and governed. Agency theory is a part of corporate governance as corporate governance is not complete without the committee members, shareholders and board of directors of a company. This interaction between the shareholders, committee members and the board of directors are help in order to improve the performance of the company. In 1997, Malaysian corporate governance mechanism was strengthened and reformed and resulted in the establishment of the Malaysian...
8 Pages(2000 words)Essay

Agency theory linked to management accounting

...Agency-Theory Linked to Management Accounting Introduction The behavioural premise of the innovative financial-economic theory is based contradict to the thoughts of trustiness, faithfulness, loyalty, stewardship, and care for others that motivate the conventional principal-agent association. The conventional conception of agency is established on ethical measures. But the theory in the conventional sense is not possible as human beings are rational maximizers. Duska (1992) elucidates as: "To do something for another in a system geared to maximize self-interest is foolish. Such an answer, though, points out an inconsistency at the heart of the system, for...
3 Pages(750 words)Essay

The Nexus between agency theory and corporate governance

...The Nexus between Agency theory and Corporate Governance Thesis ment This essay tries to explain the agency theory and corporate governance in the present day environment. Economists recently are more diverted to the phenomenon of organisation. The recently formulated organisation theory agency theory is different from the ones which existed in the past. This paper attempts to explain the problem which exists between the agents and corporation within the link of contracts. Introduction According to Jensen and Meckling's (1972) organisations are to be viewed as only a set of implied and open contracts with connected...
11 Pages(2750 words)Essay

Agency theory

...STAKEHOLDER THEORY AND AGENCY THEORY al Affiliation) Different from Agency theory that focuses fully on shareholders’ interests, the Stakeholder concept emphasizes on the welfares of all the partakers in the firm. Stakeholder concept is reflected as a concept of ethics and organizational management. Under this concept, what the managers ought to do is to not only augment stockholder value, but as well benefit the returns of the shareholder group (Berle & Means 2010). Therefore, the stakeholder theory forms a better basis for corporate governance’s development in the 21st era than the agency theory. The...
4 Pages(1000 words)Essay

Agency theory and the question of shareholder primacy

... Topic: Agency theory and the question of shareholder primacy Introduction The growth and expansion of any corporate firm isa process rather than an event. As part of the process, there are several disintegrated components that are brought together to form a single unit of organization that is made up of stakeholders who put their resources and ideas together to ensure growth and expansion. It is based on this fundamental principle that ownership and control are created within the same corporate firm. Unfortunately, Stout saw a situation where the distinctive relationship between ownership and control under the modern corporate firm structure leads to a conflict of interests among rival stakeholders (1190). As a way of dealing... with such...
9 Pages(2250 words)Essay

Agency Theory and Corporate Governance Problem

...AGENCY THEORY AND CORPORATE GOVERNANCE PROBLEM The concept of corporate governance problem evolved as soon as formal organizational structures evolved. There exists conflict of interest between the shareholders of a company and the management within an organization. While the company managers aim at increasing the size of the company and intend to benefit optimally from the growth of the firm, the company owners wish that the company share value would increase and the amount of benefits would increase (Childs et al., 2005: Eoltn & Gruber, 1997). Therefore, a conflict of interest arises due to misalignment of the two groups of people. The Agency theory conceptualizes the...
8 Pages(2000 words)Essay

To resolve the corporate governance problem, agency theory recommends an independent board structure and the use of equity-based compensation for senior executives. Examine the extent to which agency theory recommendations help to resolve the corporate go

...Corporate Governance and Agency Theory Corporate Governance and Agency theory Introduction The three types of business ventures are: the sole proprietorship, business partnership, and the limited companies. The sole proprietorship is business venture that is managed and owned by individual. The profits realized are taxed in the form of an individual’s income and the life of the company is dependent on the life of the owner (Core, Guay &Larcker, 2003). The amount of investments injected in the venture is limited to the owner’s wealth. On the other hand, the partnership ventures are characterized by the requirements for the agreements between the involved partners. Its...
8 Pages(2000 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Agency theory for FREE!

Contact Us