Discuss the Influential Role That Agency Theory, Transaction Cost Theory and Stakeholder Theory Have Played Both in the Conception and Reform of Corporate Governance. Your Discussions Should Include the Basic Concepts
1. Introduction
The paper reviews three important theories in corporate governance, different theories using different terminology, and views corporate governance from different perspective. Some articles are used to support these theories in this paper. From the Cadbury Report in 1992, we can get the information that corporate governance is the system by which companies are directed and controlled, which involves a set of relationship between a company’s management, its board, its shareholders and other stakeholders, and the objectives for which the corporation is governed. There are mainly three important theories included in corporate governance, which are agency theory, transaction cost theory and stakeholder theory, each theory views corporate governance from different perspectives. These three theories play significant roles in understanding the corporate governance and helpful for people to know how the corporate governance developed.
2. Agency theory
2.1 Theory
Agency theory is a concept that explains why behavior or decisions vary when exhibited by members of a group. It describes the relationship between two parties (principal and agent) and explains their differences in behavior or decisions by noting that two parties often have different goals and different attitudes toward risk.
The concept of agency theory originated from the work of Adolf Augustus Berle and Gardiner Coit Means, they discussed the issues of the agent and principle as early as 1932. Berle and Means explored the concepts of agency and their applications toward the development of large corporations. They saw how the interests of the directors and managers of a given firm differ from those of the owner of the firm, and used the concepts of agency and principal to explain the origins of those conflicts.
Michael C. Jensen and William Meckling shaped the work of Berle and Means in the context of the risk-sharing research popular in the 1960s and 1970s to develop agency theory as a
The paper reviews three important theories in corporate governance, different theories using different terminology, and views corporate governance from different perspective. Some articles are used to support these theories in this paper. From the Cadbury Report in 1992, we can get the information that corporate governance is the system by which companies are directed and controlled, which involves a set of relationship between a company’s management, its board, its shareholders and other stakeholders, and the objectives for which the corporation is governed. There are mainly three important theories included in corporate governance, which are agency theory, transaction cost theory and stakeholder theory, each theory views corporate governance from different perspectives. These three theories play significant roles in understanding the corporate governance and helpful for people to know how the corporate governance developed.
2. Agency theory
2.1 Theory
Agency theory is a concept that explains why behavior or decisions vary when exhibited by members of a group. It describes the relationship between two parties (principal and agent) and explains their differences in behavior or decisions by noting that two parties often have different goals and different attitudes toward risk.
The concept of agency theory originated from the work of Adolf Augustus Berle and Gardiner Coit Means, they discussed the issues of the agent and principle as early as 1932. Berle and Means explored the concepts of agency and their applications toward the development of large corporations. They saw how the interests of the directors and managers of a given firm differ from those of the owner of the firm, and used the concepts of agency and principal to explain the origins of those conflicts.
Michael C. Jensen and William Meckling shaped the work of Berle and Means in the context of the risk-sharing research popular in the 1960s and 1970s to develop agency theory as a