Value Based Corporate Governance And The Impact Agency Theory

1923 Words Nov 17th, 2015 8 Pages
Value based corporate governance.
I would like to explore value based corporate governance and the impact agency theory has on it. Agency theory looks at the conflict of interest between people with different interests in the same assets. It is important to look at the aspects of agency theory as it is an important part of organisation behaviour and is integral to corporate governance. Agency cost, the cost incurred by a company due to agency conflict and agency theory is sometimes used as an independent aspect and at times jointly with agency theory. For good corporate governance it is important to find a fine balance between the shareholders and the management of a company.
Management might want to take the company in a direction that would increase their hold over the company and benefit them monetarily but such a move would not be seen as a positive one by the shareholders. Shareholders would want the management to make the company function in such a way that dividend for shareholders increases and the value for the shareholders increases. Agency cost is the phenomenon that occurs because of core issues that arise from the struggle over conflict of interest arising between management of the company and the shareholders. Thus, Agency cost is basically the internal cost that comes from or has to be paid to an agent who is chosen to act in representation of a principal.
There have always existed corporate scandals ever since corporates have existed but the complexity of…
Open Document