- Words: 6386
- Length: 20 Pages
- Topic: Business
- Paper #: 67080653
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.