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Stakeholders and culture - Owners and governance - Corporate governance

Q: What is the governance chain?

The governance chain shows the roles and relationships of different groups involved in the governance of an organisation.

Q: What is the principal-agent model?

Principal is the owner and agent is the manager . Principals employ agents.

Q: From what 3 problems do the governance issues in principal-agent theory arise?

Knowledge imbalances - agents typically know more than the principals about what can ans should be done. Monitoring limits - difficult for principals to monitor the performance of their agents closely. Misaligned motives - unless their motives are closely aligned to principals' interests, agents are liable to pursue other objectives that reward them better .

3 important questions on Stakeholders and culture - Owners and governance - Corporate governance

What is the governance chain?

The governance chain shows the roles and relationships of different groups involved in the governance of an organisation.

What is the principal-agent model?

Principal is the owner and agent is the manager. Principals employ agents.

From what 3 problems do the governance issues in principal-agent theory arise?

Knowledge imbalances - agents typically know more than the principals about what can ans should be done.
Monitoring limits - difficult for principals to monitor the performance of their agents closely.
Misaligned motives - unless their motives are closely aligned to principals' interests, agents are liable to pursue other objectives that reward them better.