Learning Objective:
This discussion question will enable the students understand the concepts of agency problem and agency costs.
Discussion Question:
Shareholders are considered as the owners of a corporation so “wealth maximization of the shareholders” remains one of the main goals of the corporation. Even so, sometimes there may develop a situation when managers pursue their own goals at the expense of shareholders’ goals.
This situation of conflict is termed as “Agency Problem”. In this particular situation, agents (managers) emphasize only those aspects of performance that are related to their own interests by ignoring the interests of principals (shareholders). In order to align the managers’ goals along with the shareholders’ goals, the corporation has to incur some agency costs. You are required to discuss the techniques of aligning the “agent-principal” goals for which the agency costs are generally incurred.
Important Instructions:
1. Your discussion comments must be based on logical facts.
2. Your comments should be brief and to the point. Avoid unnecessary details.
3. The GDB will remain open for 2 working days / 48 hours.
4. Do not copy or exchange your comments with other students. Two identical / copied comments will be marked Zero (0).
5. Obnoxious or ignoble comments should be strictly avoided.
6. Questions / queries related to the content of the Discussion Board, which may be posted by the students on MDB or via e-mail, will not be replied till the due date is over.
Ø For Detailed Instructions please see the Announcement