Corporate governance agency theory essay

As noted, whilst it is acknowledged that there were many 2 An overview and short critique of these models and the director primacy model is available in Appendix The stakeholders include the farmers, governments, customers, activists, environmental groups, forex, Shareholders suppliers and employees.

Essay: Agency Theory and Stakeholder Theory compared

This paper aims to look at the corporate governance issues relating to the coffee shop market. Globally, the structures in which businesses operate have changed over the years. The company actively participates in the community work.

Custom Corporate Governance at Starbucks Essay

These include shareholders, employees, suppliers, government, creditors, the entire public and local community and customers.

Some of its products are seasonal or specific to certain areas. The company was formed in in Seattle, Washington. In general, shareholders do not invest in corporations for altruistic motives; they want a return on their investment.

Thereafter the thesis is divided, first focusing solely on risk-taking and governance mechanisms, their analysis and partial conclusion, followed by the analysis of the second strand, the ethical hypotheses.

As such, changes in behavior are also driven by changes in incentives Prendergast and behavior is directed by maximizing self-interest under game-theoretical like conditions Perrow It entails directing and controlling of companies.

The board has three committees that have independent directors. However, the agent also does not have as much information about the job or task to be performed as does the principal. The oil spillage at the Gulf of Mexico was considered by the courts as water pollution which proved a hazard to the community in that area.

According to agency theory, the principal hires or delegates an agent to perform work.

Agency Theory & Corporate Governance Research Paper Starter

Having outlined the motivation and structure, the following section seeks to qualify the predominant focus on governance and greed with respect to the GFC and their connection to the economic theory. This debate, in combination with previous research on agency theory in banking Smith et al.

The recognition of the CSR is important as it shows that the company is accountable to all its stakeholders due of its actions. As such, just as the principal may learn which incentives work the best, the agent learns which aspects of performance the principal is interested in and primarily seeks to optimize these exact aspects ShapiroBrickley et al.

Herein, actions are undertaken according to selfinterest Fama and opportunistic behavior is fostered when monitoring contracts and relationships becomes difficult and costly due to bounded rationality and information asymmetry PerrowDonaldson However, hidden action refers specifically to the information asymmetry in the contractual relationship ArrowEisenhardtwhereas opportunistic behavior is an inclination in the human Jensen 5.Agency theory relative to corporate governance assumes a two-tier form of firm control: managers and owners.

Agency theory holds that there will be some friction and mistrust between these two groups.

Agency theory

Therefore, in order for independent directors to act and perform effectively as well as support corporate governance practices, strong autonomy must be given. Conclusion. Furthermore, corporate governance aims to resolve the principal-agency problem.

One important aspect to support corporate governance is the involvement of independent directors. The corporate governance is based on four theoretical foundations which include; Agency theory, Transaction cost economics, Resource dependency theory and Stakeholder theory.

Agency Theory The theory is characterized by a large number of shareholders or owners who. This thesis therefore poses the questions: Did the agency theory prescriptions of corporate governance and directors’ financial literacy impact the risk profile of Scandinavian banks during the Global Financial Crisis?

Corporate Governance Agency Theory Finance Essay Published: November 27, The role of investor's protection has become very important in corporate governance in recent years. View Essay - Corporate Governance_ Agency Theory and Stewardship Theory Essay from MBA at Columbia Southern University.


Corporate governance agency theory essay
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