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Additionalmaterials1 - express itself in ways as seemingly...

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August 31, 2011 ECON 6000 Additional Study Materials #1 Instructor: Bram Gallagher Chapter one discusses the difference between for and not-for-profit firms. Keeping in mind the shareholder value maximizing objective of for-profit firms and the efficiency objective for not-for-profit firms, examine these two annual reports and the different information presented in them. Intel Corporation: http://www.intc.com/intelAR2010/ WWF: http://www.worldwildlife.org/who/financialinfo/2010AR/WWFBinaryitem18606.pdf Also discussed is the idea of the principal-agent (PA) problem. Though the example of RJR Nabisco's extravagant retreats and private jets is certainly illustrative, the PA problem can
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Unformatted text preview: express itself in ways as seemingly innocuous as the office thermostat. Below is a recent paper discussing energy usage stemming from the PA problem. In this example, the relationship is assumed to be tenant-owner rather than executive-shareholder, but on the bottom of page two is a line that neatly sums up the likelihood of the existence of a PA problem: “A PA problem may exist whenever the payer is not the same agent as the decision-maker or the user. ” http://escholarship.org/uc/item/6p1525mg When reading, keep in mind the powerful incentive effects of the disconnect in objectives....
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