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In extreme cases, managers might manipulate the price of stock to improve their own financial future, releasing falsely positive reports to net a gain, and then selling shares before the real truth about the company's poor financial health becomes known.
3. Finally what can be done to insure that we will have a greatly reduced probability of agency issues with the management of FF&F, Inc.
Linking pay to performance has been one popular way of remedying the problem of agency on an executive level. However, this is problematic to some degree, as outside factors can substantially impact short-term profitability. A bad manager might receive a bonus during times of economic boom, while a good manager instating needed reforms might oversee the company during a period of economic decline, or simply have to allow an initial loss to see a profit later on. Ensuring that managers are shareholders is another method of ensuring that the interests of the managers are in line with the company's interests, and therefore, shareholder's...
However, there is always the danger of the CEO manipulating the company's apparent performance for his or her own interest, in that case.
There is no perfect method to ensure that agency issues do not exist. One thing shareholders can do, however, is to be vigilant about monitoring how the company is doing. Although this may sound obvious, in an era where many shareholders own mutual funds, and do not know where the funds are invested, or whose portfolios are themselves managed by outside agents in the form of brokers (who may likewise have their own agenda), critically and continually evaluating the company's financial data, and carefully reading management's statement of its vision of where the company will be in the future is essential. Ultimately, managers are the employees of shareholders both large and small, and shareholders must remember this fact.
Works Cited
Agency theory framework." (1997). Babson College. Retrieved 26 Nov 2007 at http://www.babson.edu/entrep/fer/papers96/shane/shane3.htm
Works Cited
Agency theory framework." (1997). Babson College. Retrieved 26 Nov 2007 at http://www.babson.edu/entrep/fer/papers96/shane/shane3.htm
Agency Theory The main problem in the case is that the CEO, Mr. Rodriguez, did not uphold his duty of care to the shareholders. Agency theory holds that the management of a company is an agent of the shareholders and should undertake actions that support the improvement of shareholder wealth at the firm. There are several points where this did not take place. The company's strategy of being a low-cost provider
Agency Theory and Executive Compensation An Analysis of Agency Theory and Aligning Executive Stock Options with Corporate Objectives According to Jensen and Meckling (1976), any medium- or large-sized firm today is not directly managed by its owners (the shareholders) but rather by "hired hands" that is, professional managers. Presumably, these professionals are capable and diligent agents of the owners, but these professionals' interests are not always the same as the shareholders' interests.
Audit Quality and Agency Theory Auditors have existed since the 1300's and for most of that time, their role remained the same. Auditors were the life-line of governments and businesses, helping establishments maximize profit and efficiency, the benefits of which were enjoyed by everyone. As time passed, auditors were given new roles and worked routinely to assure the maximum profit of the company that employed them. In the past 50 years, however,
Parole violations and new crimes are frequently committed because reentering people do not have the skills and resources in order to become accustomed to community life. A lot are not capable to find work not only because they do not have considerable work histories and work skills, but also due to the societal stigma connected to their criminal and substance use histories. Characteristically, time spent in prison weakens family
24). The findings of this study challenge accepted notions concerning the efficacy of the teacher-initiated initiation -- response -- feedback (IRF) sequences that are delivered in whole group teacher-fronted environments. Based on his findings, Baynham argues that "teacher and students are robustly claiming interactive space in classroom talk, bringing the outside into discussion. This data, drawn from narrative and classroom data in case studies of Adult ESOL classrooms, points to
Accounting Theories and Business Decisions: The Business World Case Facts Application of theories Other cases of stakeholder theory application Accounting theories and business decisions: The business world There are many theories that explain the complexity of relationship between different groups of people directly and indirectly related to an organization. Two of the most comprehensive and most discussed theories are stakeholder theory and agency theory. Both the theories describe what the main purpose of each group