Agency theory was developed by Jensen and Meckling in 1976 who defined agency relationship as a contract under which one or more persons delegate decision making authority to another person to perform some services on their behalf. Agency theory explores the relationship between a principal and an agent. In the context of a company, the manager (agent) acts on behalf of the shareholder (Principal). Company owners empower managers to make decisions on their behalf. Shareholders do not actively participate in the management of their investments instead they engage managers to act on their behalf. This makes managers have information advantage hence creating incentive to maximize their own value as opposed to that of the shareholders. Scott (2012) …show more content…
Secondly problem of risk sharing arising from diverse attitude of the principal and the agent towards risk, the problem is each tends to select a different action when the risk happens (Depoers, 2000). One way in which agency problem can be minimized is by means of contract, it helps in bringing shareholders interest in line with managers’ interests (Healy and Palepu, 2001).These contracts require management to disclose relevant information to investors and to creditors. Consequently principal can check if the management complied with the contract agreements and evaluate if their decisions are in alliance with their interest, monitoring managers by mean of contract comes with a cost at the expense of manager’s compensation and in order to reduce any potential conflict, principals incur monitoring costs while agents incur bonding costs which guarantees the interest of the principal is prioritized. Agency costs are the total of monitoring costs, bonding costs and residual …show more content…
The capital need theory can help to explain the reasons behind the disclosure of voluntary information made by companies. Healy and Palepu (2001) pointed out that managers are motivated to disclosure more by decreasing information asymmetry problem and eventually decreasing cost of external financing. The capital need theory predicts that with increased voluntary disclosure investors’ uncertainty is minimized which results in lowering company’s cost of capital (Schuster and O’Connell, 2006). The theory suggests that voluntary disclosure helps in achieving a company’s need to raise capital at a low cost (Choi, 1973). This theory implies that company’s managers are motivated to disclose more information to enables them to raise capital on the best available terms (Gray et al.,
By creating this system, both the shareholders and the CEOs are happy with their
It builds more efficient manager and employee team when it comes to projects. The employees understand the roles that they play within the organization. Managers are better equipped to correct their staff without the feeling of hostility. This will create a higher moral among employees, thus making the work environment more healthy and positive. We at CEN Solutions suggest that you create an organization flow chart to improve your communication process.
Block says instrumentalism and relative autonomy would explain the actions of the state during the 2008 Economic crises. Blocks explanation of instrumentalism and relative autonomy hinges on the dynamics of three groups State Officials, the Capitalist Class, and the Working Class. Block states in normal times the states structural interests are centered on business confidence, capital investment, a strong economy, revenue, and public support through social programs all of which equal a strong state. However, during a crisis or extra times the state is interested in expanding their role in state government and exerting relative autonomy as it did during the 2008 economic crises, when the state saved the day, and intervened with bailouts for
Strategies In the past there have been arguments between agencies and professionals over funding and arguments over who does what, which obstructed closer professional working. A number of strategies have now been developed that focus on improving co-operation for the benefit of those using services. 1) Multi-agency working: The support planning process and single assessment process have inspired bigger inter-agency cooperation with the individuals needs being central to the process.
The purpose of this paper is to compare and contrast the economic and voluntary spirit models discussed in the article titled, Toward Nonprofit Organization Reform in the Voluntary Spirit: Lessons From the Internet (Brainard & Siplon, 2004). Additionally, analysis will be presented with regard to acquiring and expending resources according to each model, specifically volunteers and charitable donations. Finally, this paper will discuss the correlation between charitable donations and giving within nonprofit organizations and biblical principles. Similarities Between the Economic and Voluntary Spirit Models Several similarities exist between each of the models presented in the article for nonprofit, or income tax exempt, organizations (Worth,
Political scientists and historians have always been on the opposite sides on the subject of how a decision is made. Political Scientists claim that by knowing a few details into the major players prior preferences that all future actions can be predicted by using that Rational Actors Model. However, historians refute this theory arguing that without knowing the context or the environment of the player, one can never truly understand the decision making process. By using the events which led to the internment of Japanese Americans I hope to show that any event can fit the model in hindsight but at the time of the actual decision there could have been many options for Japanese Americans short of internment.
When employees see they are valuable to the company and they are secure it gives them confidence and in return they give their loyalty to the
Benefits and Challenges of Multi-Agency Introduction Multi-agency can be defined as the involvement of different corporations which works together to eliminate vital issues or problems in the society. The involvement of ranges of professionals in an integrated way provides a strong platform which helps to attain a positive outcome for the young generation and the children. The working in partnership the key element of multi-agency, therefore the working of the multi-agency is faces variety of changes, however the perspectives and approach of the agency is supported by the government to enhance social condition, education and health facilities (Atkinson, 2005). The main objective of this research paper is to identify the working process and to recognize the challenges in the working mechanism. Therefore, the main aim is to analyse and investigate the working mechanism and different models of multi-agency.
Social process theory has several subdivisions including: social control theory, social learning theory and social reaction (labeling) theory (will only focus on social control theory). Social control theory insinuates every person has the possibility of becoming a criminal, but most people are influenced by their bonds to society. It contends that individuals obey the law and are less likely to commit crime if they have: learned self-control, attachment (to family, friends, peers, education, etc.), commitment (to school, learning, etc.), involvement (in leisure activities, sports, etc.), and belief (those that are positive). According to social control theory, an individual is more likely to be criminal/deviant if they are detached and alienated (from friends, education, family, etc.),
Introduction The main objective of this particular case study is to assist Victor Dubinski, the current CEO of Blaine Kitchenware, decide whether or not repurchasing shares and changing the firm’s capital structure in favor of more debt could actually be benefit the company and its shareholders. Blaine Kitchenware is a small cap, public company who focuses on selling various different residential kitchen appliances. Up until this point, the company has only used cash and equity financing to acquire independent kitchen appliance manufacturers, and expand into foreign markets abroad. Given their excess cash and lack of debt, Blaine Kitchenware is considered to be “over-liquid and under-leveraged” (Luehrman & Heilprin, 2009).
Shareholder will finance a project and the dividends and profits are devided accordingly as agreed by the parties. Al Bai Bithaman Ajil Financing with defered repayment over a specific period of time. Al-Mudharaba An agreement to provide the capital by one party and
This is a good way of increasing employee 's motivation and if used properly always have positive effects on the normal business
Furthermore, in the last decade, an increasing number of major shareholders attempt to influence corporate behaviour by using their equity stakes in organisation to pressure the management for improved performance and increase the value of their investments. However, shareholder activism is believed to be very controversial. Some proponents of shareholder activism believe that the involvement of shareholders in the management of the company ensures that the invested capital is spend properly and that the directors do grant themselves excessive remuneration packages and focus mainly on maximisation of shareholder value. Opponents, on the other hand, often criticise a high degree of shareholder activism as they considered that active investors are mainly focused on their own short-term benefits and profits and not on the long term aims and goals of organisations (Corkery,
The History of Business Ethics and Stakeholder Theory in America Ethics play a huge role in the global business field, since considerations have to be made on moral practices, values, and judgments that govern the direction and overall success of the company. Consequently, over the progression of history, managers, entrepreneurs, and stakeholders at the helm of organizations have always had the mandate of making moral resolves on matters of ethics. According to Hunter (2003), such an approach to ethical behavior prompts a substantial growth in the organizational corporation, as well as maximizing business profits, and creating a reputable company image (Cutler, 2004). Notably, the overall performances of organizations that take part in unethical