My objective was to explain agency theory and the nature of the principal-agent relationship between the owners and managers of a corporation, including potential ethical problems that may occur.

I have learned that managers have a fiduciary responsibility to the owners of a company to act in their best interest. However, conflicts of interest do arise, and some managers may deviate from doing what is right for personal gain. Also, I will need to look at the principal-agent relationship in management and its impact on the organization. The principal-agent relationship exists when those persons hired to manage an organization are not also owners of the organization. The goals of owners (shareholders) may be different than that of organizational managers. Organizations typically try various approaches to resolve the differences in priorities that can exist in the principal-agent relationship.

• We had to watch: https://www.youtube.com/watch?v=6-w3RY0tc7o
• How would you review agency theory?
• How would you answer the following 5 elements listed below?
  1. How would you consider if all types of organizations have principal-agent relationship issues, or if it is more prevalent in some types of organizations over others?
  2. What three corporate mechanisms that an organization could institute to manage agency problems would you include?
  3. How would you describe potential ethical problems that may arise when there is a break-down of the principle-agent relationship?
  4. What would you provide as a supported analysis of how a Christian worldview can minimize these conflicts?
  5. What three sources would you provide?

Answer rating: 100% (QA)

Review of Agency Theory Agency theory is a framework in economics and management that examines the relationship between principals owners and agents managers in organizations It focuses on how conflic... View the full answer