Stakeholders and culture - Owners and governance - Corporate governance
3 important questions on Stakeholders and culture - Owners and governance - Corporate governance
What is the governance chain?
The governance chain shows the roles and relationships of different groups involved in the governance of an organisation.
What is the principal-agent model?
Principal is the owner and agent is the manager. Principals employ agents.
From what 3 problems do the governance issues in principal-agent theory arise?
- Knowledge imbalances - agents typically know more than the principals about what can ans should be done.
- Monitoring limits - difficult for principals to monitor the performance of their agents closely.
- Misaligned motives - unless their motives are closely aligned to principals' interests, agents are liable to pursue other objectives that reward them better.
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