Question
What is the principal-agent problem? and What is corporate governance? Do they complement one another or do they conflict with one another?
My Response
The principal-agent problem occurs in case there is a disagreement between an individual or a group and the person they have chosen to act on their behalf. The group or individual, in this case, is referred to as the principal while the person authorized to work on their behalf us referred to as the agent. There are different issues that might lead to the principal-agent problem. For starters, it is when there is asymmetrical information between the two parties. In such an instance, the agent will often have more information when compared to the principal (Corporate Finance Institute, n.d.). Additionally, it will occur in the case the agents start working towards their interestsat the expense of the principal.
As for corporate governance, it will involve a set of rules and practices which are used in the process governing a certain organization. Notably, corporate governance will involve balancing the interests of different stakeholders in an organization (Chen, 2020). Also, it will provide a framework that will be used in the process of attaining the set objectives in an organization. The board of directors in afirm will be the main body that influences corporate governance.
In assessing the terms which have been stated above, they will complement each other. That is because, with good corporate governance, the probability of the principal–agent problem is reduced to a huge extent. Inversely, bad corporate governance will lead to the emergence of the principal–agent problem. Therefore, it is vital for a company to invest in having good corporate governance as it will lead to a working relationship between the principal and agent.
Chen, J. (2020, April 12). Corporate Governance Definition. Retrieved from https://www.investopedia.com/terms/c/corporategove…
Corporate Finance Institute. (n.d.). Principal-agent problem – Overview, examples and solutions. Retrieved from https://corporatefinanceinstitute.com/resources/kn…
RESPONSES
Respond to two or more of your classmates 150 word min.
Virginia,
The principal-agent problem is a major disadvantage of organization economic activity within firms, as opposed to within markets. It can arise when an agent such as a manager, performing activities on behalf of principle, pursues his or her own interest. Managers may be more interested in pursuing their own interests such as empire building and job security. Plus managerial perks such as corporate jets or executive retreats at expensive resorts rather increasing shareholders’ value. The corporate governance mechanisms to direct and control the enterprise which a firm must put in place to ensure the pursuit of its intended goals. A system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. Corporate governance is about checks and balances and about asking the tough question at the right time. The Board of directors of the company is responsible for making the corporate governance for the firm to earn its objectives with the interest of everyone. The bad is the one that will affect the financial status of the organization. The corporate governance compliance the principle agent as if there is a principal-problem arising, the corporate governance could be used to make implement in the rules and regulations under which the agent is working to restore the principal’s interest. Corporate governance is the set of rules and regulations set by the government for the smooth running of industries and companies. All the industries must comply with these rules. Both corporate governance and principal-agent problems conflict with one another as one tries to run a company smoothly while the other destroys the company.
Erica,
The principal agent problem is a situation in which an agent performing activities on behalf of a principal, pursues his or her own interest. Situation can arise when an agent, usually a manager, does not look out for interest of the principal. A solution to overcome the principal agent problem is to give the agent ownership, through stock options. The principal can also have the agent report to them on a regular basis. Corporate governance is a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. There should be policies, rules and practices set in place that dictate how a companys board of directors manages and oversees the operations of a company. When a company has poor corporate governance, it leads to the collapse of the company or financial losses for shareholders. Like it said in the book, due to poor corporate governance from companies, it can lead to accounting scandals, like what happened in the early 2000s and global financial crisis of 2008. I believe that principal agent problem and corporate governance can conflict with one another. Its important for companies to have strong rules and regulations set so everyone is in synch with one another, and having this can eliminate the possibility of a principal agent problem arising. They conflict with each other because corporate governance wants their strategic goals to be successful and legal, and principal agent problem is when the agent is pursuing his or her interest rather than the principals, which can lead to losses for the owner or shareholder.
WRITE A PARAGRAPH ON WHAT YOU LEARNED AND HOW YOU PLAN TO APPLY IT
I have attached this weeks assignement. Use the material thats attached as well as the DQ question to answer this question
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
Ace Writing Center has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.
Essays
At Ace Writing Center, Nowadays, students normally have extremely busy schedules. You will note that some of them have to take on some evening or weekend jobs in order to get some income that can help them to sustain in college or in the university. This can deny them a chance to write all the essays given. Others usually get bombarded with a lot of work by their lecturers. This can still delay such students from working on all their essays. However, some of them usually try to work on all these essays but end up delivering their work late. This can prevent them from graduating since most lecturers are strict on deadlines. If you want to write a business essay, the wise way is to hire an outstanding essay writing service like us, so that you can get the best results. If you are keen, you will note that many companies usually overcharge their customers. Some of them are there only to make money. And in reality, they really don’t care to build a long term commitment with students. You should not choose such companies. You should take your time and choose a reliable company to work with. Ace Writing Center is the ultimate solution for you. We have been offering our writing service for more than 7 years. This is a clear indication that you will get quality essay writing service. We have a wide range of writers who can work on any business essay that you might have. We believe in doing extensive research so that we can provide quality work to all our clients. .
Admissions
Admission and Business Papers
Have you ever had to write an admission essay for college? The majority of students face the same issues when applying to a university or college and many in such situations decide they need professional help to cope with this matter. They get in a situation when the deadline keeps coming closer but lack motivation to start because they are just not sure if their writing skills are strong enough. We have a solution for you! Ace Writing Center is the best admission essay writing service with a large professional team and years of experience in providing high-quality papers to students of all levels and faculties. The mission of our team is to help students make their dreams of entering a good college come true and that’s what we offer!.
Editing
Editing and Proofreading
Sometimes all the words for your paper just flow out of your mind and into your fingers. You type quickly at your keyboard and there they are, your beautiful words right there on the screen. But you have no idea how to polish it up. You may be wishing there was a paper writing service that offered this type of writing service. Look no more! Here at Ace Writing Center, we offer you an editing and proofreading option that you can't find anywhere else..
Coursework
College Essay Writing
In case you are familiar Ace Writing Center, you know the way to distinguish a better company from a cheap one exactly. First of all, poor service website does not have a sufficient support. We think support team is an essential part of success; it has to answer all clients’ questions and be a connecting link between clients and their writers. On our web-service you will get answers about anything you need and your writer will receive all your instructions, assignments and requirements exactly and swiftly. A writing service that we run has got a flexible pricing system that will save you from senseless wastes and many bonus systems that let you sparing money for something important for you.
