Premium Essay

Principal-Agent

In: Other Topics

Submitted By Malicious1
Words 526
Pages 3
2. Explain several dimensions of the shareholder-principal conflict with manager-agents known as the principal-agent problem. To mitigate agency problems between senior executives and shareholders, should the compensation committee of the board devote more to executive salary and bonus (cash compensation) or more to long-term incentives? Why? What role does each type of pay play in motivating managers?

There are several dimensions to the principal-agent conflict. Principal-Agent Relationships exist whenever one person or party works in the interests of another party. The owner (the principal) hires and often delegates decision-making authority to professional managers (the agent) to perform tasks on his behalf. The challenge for the principal is to create an environment in which the agent has incentives to align their interests with those of the principal. The principal typically creates incentives for agents to act as the principal wants. The principal-agent conflict acerbates when the incentive system creates a conflict of interest, the principal cannot ensure the agent is performing exactly the way the principal would like and due to the intrinsic unobserved managerial effort and the presence of random disturbances in team production. The lack of information shared between the two makes it impossible and expensive for the principal to monitor the decisions and performance of the agent. The agent usually has less to lose than the principal; therefore they often seek acceptable levels of profit and shareholder wealth while pursuing their own self interests. The uncertainty and risk includes the principal not knowing the extent to which the contract has been satisfied and they end up paying agency costs.

To mitigate agency problems between senior executives and shareholders, the compensation committee should devote more to executive salary and…...

Similar Documents

Free Essay

Intelligent Agents

...INTELLIGENT AGENTS In which we discuss what an intelligent agent does, how it is related to its environment, how it is evaluated, and how we might go about building one. 2.1 INTRODUCTION An agent is anything that can be viewed as perceiving its environment through sensors and acting upon that environment through effectors. A human agent has eyes, ears, and other organs for sensors, and hands, legs, mouth, and other body parts for effectors. A robotic agent substitutes cameras and infrared range finders for the sensors and various motors for the effectors. A software agent has encoded bit strings as its percepts and actions. A generic agent is diagrammed in Figure 2.1. Our aim in this book is to design agents that do a good job of acting on their environment. First, we will be a little more precise about what we mean by a good job. Then we will talk about different designs for successful agents—filling in the question mark in Figure 2.1. We discuss some of the general principles used in the design of agents throughout the book, chief among which is the principle that agents should know things. Finally, we show how to couple an agent to an environment and describe several kinds of environments. 2.2 HOW AGENTS SHOULD ACT RATIONAL AGENT A rational agent is one that does the right thing. Obviously, this is better than doing the wrong thing, but what does it mean? As a first approximation, we will say that the right action is the one that will cause the agent to be most......

Words: 10076 - Pages: 41

Premium Essay

Change Agents

...from change in organizational structure to technical or managerial innovations Organizational targets for planned change include changes in strategy, objectives, technology, culture, structure, processes, management etc. These change activities in the organization are managed, facilitate and implement by change agents. There will be a discussion on why organizations enlist the help of change agents and the skills and competencies that they need to possess. There are various advantages and disadvantages for an organization in using internal and external change agents in the change processes. Lastly, few recommendations are people who bring or introduce planned change. The change agent can be manager or non-manager, employees of an organization or a consultant hired from outside (Pathak, 2010). In this paper, an analysis will be carried out on whether change leaders should be internal or external to the organization will be made based on this discussion. Change agents are enlisted by organizations several reasons. The change leaders have the professional knowledge and skills of the organisation development The roles of the change leaders, also known as change agents, must be able to solve problems in processes, systems, teams, individuals, organizational cultures, structures and designs within the organisation. The leaders will have very clear vision about the change provide intensive professional help to the organisation by giving the fair point of views on the......

Words: 1512 - Pages: 7

Free Essay

Agents

...gents Mobile Computing: Concepts, Methodologies, Tools, and Applications, Volume 1 by David Taniar (ed) IGI Global © 2009 Citation Capitulo 1: La idea principal de la tecnología móbil de agente es reemplazar el antiguo paradigma de Llamadas a Procedimientos Remotos (Remote Procedure Call or RPC) cliente servidor por uno nuevo que consiste en el transporte y ejecución de programas en torno a la red. Los resultados de la ejecución de estos programas son devueltos a la entidad que los envió. Los agentes móviles son entidades dinámicas, no deterministas [1] e impredecibles, proactivo y autónomo. Ellos pueden decidir ejercer un cierto grado de actividad sin ser invocado por entidades externas. Se puede ver por su propio conjunto de responsabilidades internas. Los agentes pueden interactuar con su entorno y otras entidades. Ellos pueden apoyar invocación del método, así como el grado de interacción más compleja como, por ejemplo, la reacción de los acontecimientos observables dentro de su entorno. Ellos pueden decidir pasar de un servidor a otro con el fin de lograr el comportamiento global del sistema. *1.-No determinista: puede devolver resultados diferentes cada vez que se ejecuta con un conjunto específico de valores de entrada Varios investigadores han propuesto una definición de los agentes móviles (Bradshaw, Greaves, Holmbäck, Jansen, Karygiannis, Silverman, Suri, y Wong, 1999; verde y Somers, 1997, Blanco 1997). Hasta ahora, no hay ni estándar ni un......

Words: 2474 - Pages: 10

Free Essay

How to Address Principal / Agent Problem in Government

...How to address principal / Agent problem in government Introduction In the Nigerian public sector is eminent that agents being the civil servants do not buy in to the principals (government) goals and objective despite the ever increasing demand for performance and accountability in the public sector. This assignment seeks to address the principal agent problem in the Nigerian government. To address the principal agent problem in government, the core is a total organizational culture change for the civil servant, from a lackadaisical attitude to work to performance driven public service that align with the goals and objectives of the government . This can be achieved by Quality Leadership: - this entail the application of democratic principles in decision making process based on the socio-economic and political needs especially as it concerns the allocation of resources in the society. Indeed good governance implies constitutionalism, rule of law and due process. There is therefore, the need for visionary, committed, focused, disciplined, purposeful, responsible, selfless and mentally resourceful leadership that has the capacity to positively manipulate and propel the civil service towards attaining a high degree of ethics and accountability Orientation: - this is aimed at helping those who are newly employed in the service to become familiar with the culture of the organization. That is new employees should be acquainted with the history of the ministry or......

Words: 454 - Pages: 2

Premium Essay

Agent and Principal Business Law

...Coleman works for Software Inc., a Delaware based corporation that sells security equipment to businesses and bars. Coleman’s duties include traveling to prospective clients and meeting with representatives of the businesses in his sales division. Coleman is on the road more than half the year. He often does not come home for more than a few days at a time. Over the course of his 17 years of employment with Software Inc., Coleman has had several stretches on the road that last three months or more. During a sales trip to Smalltown, Colorado in March 2008, Coleman found it necessary to wash his laundry. He also wanted to buy an anniversary present for his wife. Coleman went to the mall to buy the present. While at the mall, Coleman saw a ring that he really liked but could not afford. He decided to steal it. He then went to Jimmy’s Poor-Man’s Bar to meet with a client, John. Jimmy’s wasn’t a client of Coleman’s, but John didn’t like his customers to see him “doing business.” Coleman was talking with Jimmy about business when he spilled his drink all over the bar. That made him think about this cool trick where you put pure grain alcohol in your mouth, blow it out and light it. Coleman took a big drink, took out his lighter, and said, “What this!” He lit his lighter, blew the liquid and a fireball went through the room. The fireball hit Jimmy and killed him instantly. The bar also sustained a lot of damage. Software Inc. fired Coleman without even......

Words: 681 - Pages: 3

Premium Essay

Agent Orange

...Ruslan Vasilenko September 5, 2013 Vietnam and Western Imagination Paper Proposal Long Term Effects of Agent Orange I selected the topic of Agent Orange to write about in my final paper and all the controversial issues surrounding that topic. In that paper I will talk about the long term effects of Agent Orange that was used during the Vietnam War between 1961-1977. I will examine the effects it had on Vietnam people right away and in the long run. I will also talk about the political side of things and why it would be used in the first place. A brief history will be given on what it is, how it was made, how it was transported and sprayed over the Vietnam jungles, why things reached these extremes, who was behind the idea, how has the world responded in order to help those affected, and etc. I will also try and include the opinions of American and international populations on this controversial topic. The reason why I picked this topic is because I am always interested in controversial topics that humans have witnessed throughout history. These topics rise out of many occasions and especially during the times of war. Agent Orange is one of those topics because people have been arguing for many decades on both, negative and some positive, sides of it. It has caused a great deal of suffering and pain to those affected. It continues to have a tremendous impact on newborns and those people have yet to be refunded for their struggles even though its not going......

Words: 467 - Pages: 2

Premium Essay

Agents of Socialization

...AGENTS OF SOCIALIZATION Agents of socialization can also be defined as those people or groups within our social environment that affects or influence the orientation of an individual’s attitude, behaviour, emotion and self orientation either positively or negatively. They affect us directly or indirectly socially, mentally, emotionally and even on our self development. These groups are responsible for making and shaping our entire life in the society. TYPES OF AGENTS OF SOCIALIZATION They are mainly five agents of socialization in the society which affects us on a daily basis, these agents of socialization are; The Family The Religion The School The peer group The Mass media THE FAMILY: The Family is the first group to have a great influence in our lives; they are the first form of socialization experience. The family are people we share the same genetics with in nature, they are people that can be said as the closest relations to us, they are grouped into two categories; Members of the immediate family and members of the extended family. The members of the immediate family consist of the spouse (husband/wife), parent, brothers, sisters, sons, and daughters. While members of the extended family consist of the grandparent, aunt, uncle, cousin, nephew and niece. In general the family members are people that can share personal experiences and information to one and another, which on normal condition wouldn’t share with others outside the family......

Words: 1368 - Pages: 6

Premium Essay

Agents Essay

...Agents play a vital role in commercial activity. Many commercial transactions in the field of commerce are conducted through agents who act as intermediaries and represent the interests of their principals in the conduct of the principals business. Auctioneers, estate agents, commercial agents,commission agents, mercantile agents, brokers, factors, solicitors and barristers are just a few of the many people described as agents who may act on people behalf in the ordinary course of life. The essential point to be borne in mind is that the relationship between agent and principal is essentially a binding contractual one which imposes upon both parties' rights, duties and obligations. Agents “are to be found in all advanced societies and… [Their] activities are an inevitable feature of a developed economy”. In addition, it may be useful at the beginning of any discussion of agency to attempt a definition of the common factor which brings them all into the category “agent” or, indeed, it may be useful to ask whether they all properly called agents. The courts have only very rarely attempted to define the agency relationship though they have an occasion pronounced on what agency was not. In the recent case of Comet Group plc v British Sky Broadcasting the court held that promotional contracts to be quite distinct from agency. Fridman (1996) stresses that the effect of someone being an agent is that he affects the legal rights of his principal, and he works backwards from his......

Words: 2874 - Pages: 12

Premium Essay

Principal Memo to Assistant Principal

...February 5, 2009 Jack Britt High School Attn: Assistant Principal-(“intuitive-feeling” personality type) 7403 Rockfish Rd Fayetteville, NC 28306 Dear Assistant Principal: I had the pleasure of visiting Jack Britt High School and collected data about how the teachers’ feel about issues within the school. The following questions were asked to teachers’ at Jack Britt High School: • How strongly do you believe you should be involved with students’ issues? • How do you think the administration staff views the role of the teachers’ with respect to decision-making and policymaking for students’? • Do you believe you will be replaced if your students’ state test scores are low? The majority of the teachers’ feel they should be involved with students’ issues and that they can’t speak freely to the administration staff about end of grade test scores. Their total focus is their students’ test score. Many teachers believe if their students’ scores are low they will be replaced. Although Jack Britt is one of seven public high schools in the state that serves students in grades 9th through 12th that scored are at or above 90% on End-of-Course Test their teachers’ turnover rate is very high. I believe the lack of communication among teachers’ and administration is reason for the high teachers’ turnover rate at Jack Britt High School. The teachers in form me that you believe that all teachers should invest in continuing self-analysis and self-education......

Words: 736 - Pages: 3

Premium Essay

Ethical Principals

...Ethical Principals of Cancer Cell Research Brian Bocock PSY/305 March 9, 2015 Dr. Joycelynn Flowers-Ashton Ethical Principals of Cancer Cell Research October 4, 1951 has become one of the most memorable dates in the eyes of cancer cell researchers. On that date at Johns Hopkins hospital a destitute African-American woman named Henrietta Lacks passed away due to cervical cancer. Henrietta left behind her husband, David, and their four children. At only 31 years of age, this woman was going to be extremely influential in cancer research, and she had no idea. The worst part was neither did her family. Her cells were like no other cells ever seen and have provided for exceptional results for medical research since her passing, including the polio vaccine. However, the debate is over researchers taking her cells without her consent and made no immediate family members until 19 years later. Bringing this situation to the forefront of the implications and role ethics play in research today. Since the early 1970’s the story of Henrietta Lacks and her dominate cells has provided a great debate on a topic that will forever be in question, ethical principals. Dr. George Gey is the doctor that obtained the cells in order to find a cure for cancer. He was a great professional, I believe, that wanted nothing more than to find a cure for cancer, including profit. Because of this he wanted to keep Henrietta’s name private due to her passing and the understanding of a lawsuit by......

Words: 1085 - Pages: 5

Premium Essay

Agent Orange

...Was the use of Agent Orange worth it? Was it worth all the hard ache it caused to not only Americans but, also the lives of a whole entire generation of people from Vietnam? This essay is about how and why it shouldn’t of been used in the Vietnam war. And how if it wouldn’t of been used, would of saved thousands of lives. I’m not too sure what your prior knowledge is about Agent Orange so I’ll give you a little background information to it. November 1st 1955 America goes to war with North Vietnam in the attempt to end all communism in the world. The location of the war was in the lush and extremely dense jungles of South Vietnam proving to be very hard for our American soldiers. The herbicide Agent Orange was used to take out lots of the vegetation on the jungle floor to expose the enemy. Agent Orange was a very powerful and deadly chemical mixture of 2,3,7,8- tetrachlorodibenzo-p-dixoin (TCDD). *history channel* Which through experiments done on lab animals as proven to have done almost immediate health effects not including the issues that come with time such as various cancers and birth defects. Agent Orange proved to be very useful on the battle field during the war, completely destroying the plant life to expose the Vietnamese soldiers. The whole operation of using the herbicide was called operation “Ranch Hand”. *A* There were several ways (TCDD) was spread out all over the jungles, such as trucks, soldiers with spray backpacks, and most of all the was the C-123’s......

Words: 395 - Pages: 2

Free Essay

Arthur Andersen and Multitask Principal Agent Theory Essays and Term Papers

...auditing in 2002, 28,000 employees lost jobs 2. Few “bad partners”? * Disagree- the root cause was the change in organization structure, which changed the motivation. Salary originally was not related to integrity. Once the structure changed, 2x evaluation, tradeoff occurred between salary and integrity 3. Management- what would you do differently? * Firms must design organizational architecture to address agency problems in business * There needs to be a balance between performance evaluation, rewards and incentives, and decision rights * AA & Enron- AA was essentially checking their own work, no centralized organization to oversee the group 4. Multitask principle agent theory * Incentive incompatibility- the objectives of the principal and the agent are different * Slide 4- incentive conflicts * Owners aim to maximize value of profits with a reasonable degree of risk * Conflict of interest- overly conservative or risky behaviors for short term benefits, dishonesty and/or fraud 5. Are these problems unique to Anderson? Top partner at competitor- what would you do? * We don’t think these problems are unique to Anderson * Environmental factors could have motivated many companies to follow the same unethical decisions as Anderson * In order to avoid these conflicts of interest, if you were a top partner you should enforce balance of elements within organization structures, should separate the auditing vs.......

Words: 471 - Pages: 2

Premium Essay

Agents of Society

...Mashell Chapeyama Zimbabwe There are various agents that play part in the socialisation process in the society. In this essay the writer looks at five of these agents. The writer also looks at the good and bad sides of each of these agents. The agents that shall be discussed are: • Parents • Peers • Religious leaders • Teachers • Friends. Parents Parents are the main agents of socialisation for the children. This is so because the parents spend much of the time with the children, from their tender ages until they are grown up. At home the parents set standards and rules. They insist on certain folkways. Examples include that they must not eat while they are standing. In Zimbabwe parents also teach children moral codes such as clapping and thanking other people. They are taught good ways of treating others. Generally parents set the best guidance to children. This is due to the attachment which parents have with their children as well as the love they have for them. One bad thing in the socialisation that comes from the parents is insisting on certain standards which may not be good for the children. Some religious parents teach their children to disown other people’s religious beliefs. Parents may tend to create stereotypes in their children. They tend to want children to behave in exactly the same ways as they do. Teachers Apart from parents teachers give a lot of socialisation to children. Children believe that teachers are always right; hence they listen......

Words: 730 - Pages: 3

Premium Essay

The Relationship Between Principals and Agents in Business

...The Relationship between Principals and Agents in Business BUS311: Business Law I (BNJ1151A) Prof. Samantha Hodapp January 30, 2012 The Relationship between Principals and Agents in Business The relationship between a prinicipal and agent in business can and have been great; benefitting both parties involved while providing the best services or products to the consumer. Many businesses, or prinicipals, use an agent, such as an employee or sales representative, to represent the business when dealing with third-parties, also know as the consumer or client. For the sake of this writing this relationship will be based on the principal (A.O.I.), special agent(s) (sales representatives) and third-parties (clients). A special agent is a person delegated to act only in a particular transaction, under definite instructions, and with specific limits on the scope of his or her authority. (Liuzzo, 2009, pg. 259) An example in this case would be a sales representative who has authority to negotiate the price of a sale to a limit predetermined by the principal. Another example of prinicipal and agent relationships is GNC who argued that the conduct of McCreadies was sufficient to represent they had authority to enter a binding agreement on behalf of O2. McCreadies was hired by O2 to negotiate the terms of the contract and GPN argued that agents are commonly used to negotiate and enter into contracts and that O2 had at no time informed them of any restrictions of McCreadies’......

Words: 2646 - Pages: 11

Premium Essay

Agents of Socialization

...Agents of Socialization | Ways how each socialize the member of society | Examples That illustrate the agents of socialization. | Family | Morals and Values, Interaction and communication | Skills- learn to speak, learn daily chores, learn to socialize among people, to be responsible | School | Peer Group, Study Groups, Gender, | Skills- reading and writing, following rules, respect others, be polite, introduces to diversity. | Mass Media | Radio, Television, New Paper, Internet | Advertisements for persuading people to buy unnecessary items and products, Awareness (Natural Disasters and others), Exchange of information. Entertainment | Peer Group | Gangs, Study Groups | Communication of similar interests, the dress code, behaviour (good/bad), Entertainment. | 1. Develop a table to show the ways in which the following agents of socialize the members of the society. Family, School, Mass Media, Peer Group. Include examples to illustrate these ways. 2. In table form state advantages and disadvantages of the influence of exposure of the youth to the common modes of the mass media, such as Television, Video Games and the Internet. Common Modes of Mass Media | Advantages | Disadvantages | Television | Keeps us Updated on Interests, Entertainment, Educational T.V. | Violence (Violent Shows, movies) Crime Increases, Obscene Language, Aggressive behaviour, Pornography, Time Consuming. | Video Games | Entertainment, Find Friends from other countries......

Words: 340 - Pages: 2

Desperate Housewives | AU Folding Fan Chinese Flower Lace Silk Hand Held Fan Wedding Dancing Party Gift | Dragon Ball – Bảy Viên Ngọc Rồng chap 99