L_2_ - Principal Agent The Agency Problem(Managerial Agency...

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Lecture Outline Lecture 2 Lecture Organization What is Corporate Finance The Goal of Financial Manager The Agency Problem
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A Simplified Organizational Chart
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The Goal of Financial Management What are firm decision-makers hired to do? Possible goals of financial management?
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The Goal of Financial Management Equivalent goals of financial management:
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The Agency Problem The agency relationship is ____ Will managers work in the shareholders’ best interests?
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The Agency Problem Agency costs is ____ Management goals (may differ from the goals of shareholders):
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The Agency Problem Examples of Management actions that don’t benefit shareholders:
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The Agency Problem In Real Life
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Unformatted text preview: Principal ---- Agent The Agency Problem (Managerial Agency Problem) Are CEOs Overpaid? Remedy against agency costs ???? What is a good Executive option ? • Flat Salary or Bonus-Based Compensation? • Contracts should be designed in such a way as to Cost of the Agency Problem Recent Examples of Market Cap Loss After the Scandals (in $Billions): Adelphia: Loans to Family Dynegy: Lower Net Income Enron: Inflated Sales Global Crossing: Accounting Kmart: Inflated Revenue Qwest: Sales Practices Tyco: Accounting WorldCom: Hidden Expenses Xerox: Misrepresented Sales TOTAL:...
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This note was uploaded on 06/22/2011 for the course FINA 365 taught by Professor Koch during the Spring '08 term at South Carolina.

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L_2_ - Principal Agent The Agency Problem(Managerial Agency...

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