Agency Problem
AGENCY PROBLEM OF KFC
SUBMITTED TO:
BINDU KHANAL
(FACULTY, APEX MBA)
SUBMITTED BY:
ASHMITA LAMICHHANE
NAMRATA MAINALI
SMRITI GAUTAM
(PARYA)
Introduction to agency problem
Agency Problem is an economic, political, legal and corporate governance concept that aims to explain the difficulties in motivating one party (the agent) to act in the best interests of another party (the principal) instead of in his own interest.
A conflict of interest inherent in any relationship where one party is expected to act in another's best interests. The problem is that the agent who is supposed to make the decisions that would best serve the principal is naturally motivated by self-interest, and the agent's own best interests may differ from the principal's best interests.
Agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth. However, it is in the manager's own best interest to maximize his own wealth. While it is not possible to eliminate the agency problem completely, the manager can be motivated to act in the shareholders' best interests through incentives such as performance-based compensation, direct influence by shareholders, the threat of firing and the threat of takeovers.
Agency theory
The arrangement that exists when one person or entity (called the agent) acts on behalf of another (called the principal). For example, shareholders of a company (principals) elect management (agents) to act on their behalf, and investors (principals) choose fund managers (agents) to manage their assets. This arrangement works well when the agent is an expert at making the necessary decisions, but doesn't work well when the interests of the principal and agent differ substantially. In general, a contract is used to specify the terms of a principal-agent
SUBMITTED TO:
BINDU KHANAL
(FACULTY, APEX MBA)
SUBMITTED BY:
ASHMITA LAMICHHANE
NAMRATA MAINALI
SMRITI GAUTAM
(PARYA)
Introduction to agency problem
Agency Problem is an economic, political, legal and corporate governance concept that aims to explain the difficulties in motivating one party (the agent) to act in the best interests of another party (the principal) instead of in his own interest.
A conflict of interest inherent in any relationship where one party is expected to act in another's best interests. The problem is that the agent who is supposed to make the decisions that would best serve the principal is naturally motivated by self-interest, and the agent's own best interests may differ from the principal's best interests.
Agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth. However, it is in the manager's own best interest to maximize his own wealth. While it is not possible to eliminate the agency problem completely, the manager can be motivated to act in the shareholders' best interests through incentives such as performance-based compensation, direct influence by shareholders, the threat of firing and the threat of takeovers.
Agency theory
The arrangement that exists when one person or entity (called the agent) acts on behalf of another (called the principal). For example, shareholders of a company (principals) elect management (agents) to act on their behalf, and investors (principals) choose fund managers (agents) to manage their assets. This arrangement works well when the agent is an expert at making the necessary decisions, but doesn't work well when the interests of the principal and agent differ substantially. In general, a contract is used to specify the terms of a principal-agent