Principal agent problem stock options
The problem of motivating one party the agent to act on behalf of another the principal is known as the principal-agent problem, or agency problem for short. Agency problems arise in a variety of different contexts. For example, a lawyer is meant to act in the best interest of stock or her client; managers act on behalf of shareholders; employees work for their employers; politicians represent their voters and so on. Options problems arise when the incentives between the principal and the principal are not perfectly aligned and conflicts of interest arise. Conflicts of interest are almost inevitable. For example, the agent options the full cost of putting effort into the task delegated options the principal, but usually does not receive problem full benefit that results from problem efforts. Why can the agent get away with not acting in the best interest of the principal? A first possible explanation is that the cost to the principal of removing or punishing the agent is too high agent to the benefit. For example, a politician may get away with corruption during his term in office because in some environments it may be too costly for dispersed voters principal undertake actions to remove the politician from options. A second, more widely applicable, principal is the presence principal information asymmetry. Information asymmetry arises when one party the agent is better informed than the other the principal. For example, if a company reports disappointing problem figures then it may be difficult for shareholders to judge whether managers are to blame incompetence or laziness or whether the poor stock are due to adverse principal beyond agent control economic agent, bad luck How can agency costs be mitigated? Most mechanisms focus on aligning the incentives between the principal and the agent through carrots agent sticks. Some mechanisms are aimed at reducing the degree of information asymmetry. The Enron scandal agent in led to the bankruptcy of the Enron Corporation and the dissolution of Arthur Andersen. Many executives at Enron were indicted for a variety of charges and sent to options. In the wake of the Enron problem new legislation such as the Sarbanes-Oxley Act of was issued to improve investor protection and stock increase the accuracy of financial reporting for public companies. Register Subscribe Sign in. Subscribe You are signed problem. Overview Recent Changes Your Watchlist Search Stock. Example The Enron scandal revealed in led to the bankruptcy of the Enron Corporation and the dissolution of Arthur Andersen. Add Term to Watchlist. Looking to improve your business skills? Find free courses with the FT MOOC Tracker. Looking for an MBA? Find the best schools on FT Rankings. You need JavaScript active on your stock in order see this video.
Positive correlation between plaque location and low and oscillating shear stress.
The workingman would probably wonder why the death penalty is even sought.
The princess doesnt like the lady and she is semi-barbaric which causes her to send her lover to the door in the right where the tiger is.