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Unformatted text preview: tages for the sole
proprietorship form of business are that the owner can make
all the decisions and can keep all the profits. The disadvantage
is the limited access to funding. Partnerships have more funding potential, but must share the profits and losses. 6851_BROOKS_SUM_CH01.qxp 7/17/09 9:46 AM Page 2 Chapter 1
AT A GLANCE
LO8 Illustrate agency theory and the principal-agent problem.
Companies are run by managers who may have different
goals than the owners. The resolution of these potential
problems is the domain of agency theory. The principal- agent problem is the conflict between the owners of the
company and the managers hired by the owners to work in
the owners’ best interests. LO9 Review issues in corporate governance and business ethics.
Corporate governance deals with how a company conducts its
business and what controls are put in place to ensure proper
procedures and ethical behavior. Although many managers
and owners operate in an ethical manner, some do not. The government may add rules and regulations about the conduct
of business and its officers to encourage ethical and honest
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This note was uploaded on 11/03/2012 for the course FIN 3100 taught by Professor Gillette during the Fall '08 term at Kennesaw.
- Fall '08