Come up with some suggestions that may mitigate the agency problem in public corporations.

Expert Solution

Agency problem arises due to conflict of interest between promoters of company or stockholders and the management. The conflict arises due to interest of stockholder to maximize their own wealth whereas interest of manager will be to increase their own wealth.

Two ways to prevent agency problems:

1. Performance linked pay and ESOPS: By compensating for better share performance the manager can be motivated to work towards shareholder wealth maximisation . ESOP(Employee Stock options) are provided to employee so that they can also benefit from increasing share value. Since management donot want takeover bids by competitors due to job security issues but higher pay and ESOPS can align their interests with the shareholders.
2. This principal and agent conflict can be minimised by using contracts and laws. The covenants help to legally bind the mangers to performs according to wishes of the shareholders. Any breach of contract can have monetary losses for the manager which can deter managers to work against the shareholders.

jeff jeffy answered 1 year ago

5) Why does an “agency problem” exist in corporations? Why is this problem unique to corporations...

5) Why does an “agency problem” exist in corporations? Why is this problem unique to corporations and not partnerships or sole proprietorships? How can corporations minimize this problem? (10pts) 6) What is the concept of tax inversion? Why is the practice attractive to U.S. corporations? (5pts) 7) Who are “insiders” of a corporation? Why is illegal insider trading prohibited? Provide 2 examples of insider trading cases (provide names of the companies, the individuals involved, and the crime committed). (10pts)

To come up with a problem definition, write up some sample questions you would ask the...

To come up with a problem definition, write up some sample questions you would ask the president of Java Airlines to better help what they would like their software to do. Be Creative in your questions! Write up a mock Problem Definition Statement to summarize what you think the Java Airline software should be. Attention to detail will earn full marks on this assignment.

The manager of a travel agency asked you to come up with a forecasting technique that...

The manager of a travel agency asked you to come up with a forecasting technique that will best fit to the actual demand for packaged tours. You have observed and recorded the actual demand for the last 10 periods. You also identified two possible techniques for consideration: 2-month moving averages (F1), and exponential smoothing (F2) with a smoothing constant of 0.40. Using Cumulative Forecasting Error (CFE) and Mean Absolute Deviation (MAD) as your performance measures you will determine the technique...

The manager of a travel agency asked you to come up with a forecasting technique that...

The manager of a travel agency asked you to come up with a forecasting technique that will best fit to the actual demand for packaged tours. You have observed and recorded the actual demand for the last 10 periods. You also identified two possible techniques for consideration: 2-month moving averages (F1), and exponential smoothing (F2) with a smoothing constant of 0.40. Using Cumulative Forecasting Error (CFE) and Mean Absolute Deviation (MAD) as your performance measures you will determine the technique...

Define an agency relationship. What major agency problem do corporations encounter? What can be done to...

Define an agency relationship. What major agency problem do corporations encounter? What can be done to help minimize this problem?

1) Describe an asset substitution problem and discuss why convertible bonds may mitigate the problem.

Find and share an example of poor public communication. Discuss the delivery problem(s) and propose suggestions...

Find and share an example of poor public communication. Discuss the delivery problem(s) and propose suggestions for improvement OR ways to avoid the problem(s) in future communications.What can you learn from these poor examples (both yours and those of classmates)?What does “death by PowerPoint" mean to you? What are some best practices for effectively using visual aids

Working on a project for a PM class and trying to come up with some numbers...

Working on a project for a PM class and trying to come up with some numbers to include in my project for math/budgeting. Is it possible to find ROI on a simple birthday party ? If the overall budget for the party per the client is 9000$, what sorts of numbers can be generated ? Planning is in a 6 week time frame and this is being planned by an ' event company ' that is fictional, so any additional...

What are some of the major themes that come up in the chapter on Rethinking End...

What are some of the major themes that come up in the chapter on Rethinking End of Life Care. What areas of end of life care need to be "rethought"? What major ideas stood out for you?

What is the Principal-Agent problem? Give an example. Offer some suggestions for correcting the problem in the example you’ve given.

Question

Come up with some suggestions that may mitigate the agency problem in public corporations.

Solutions

Expert Solution

Related Solutions

5) Why does an “agency problem” exist in corporations? Why is this problem unique to corporations...

To come up with a problem definition, write up some sample questions you would ask the...

The manager of a travel agency asked you to come up with a forecasting technique that...

The manager of a travel agency asked you to come up with a forecasting technique that...

Define an agency relationship. What major agency problem do corporations encounter? What can be done to...

1) Describe an asset substitution problem and discuss why convertible bonds may mitigate the problem.

Find and share an example of poor public communication. Discuss the delivery problem(s) and propose suggestions...

Working on a project for a PM class and trying to come up with some numbers...

What are some of the major themes that come up in the chapter on Rethinking End...

What is the Principal-Agent problem? Give an example. Offer some suggestions for correcting the problem in the example you’ve given.