09 BUS 444 Chap 9

Primary participants are the shareholders the

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Unformatted text preview: the relationship among various participants in determining the direction and performance of corporations. primary participants are the shareholders, the management, and the board of directors.” 9-31 The Modern Corporation • Corporation A mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party. 9-32 Agency Theory • Deals with the relationship between Principals – who are owners of the firm (stockholders), and the Agents – who are the people paid by principals to perform a job on their behalf (management) 9-33 Agency Theory: Two Problems 1. The conflicting goals 2. The different attitudes of principals and and preferences agents, along with the towards risk of difficulty of principals principals and agents. to monitor the agents, and 9-34 Governance Mechanisms • Board of directors a group that has a fiduciary duty to ensure that the company is run consistently with the longterm interests of the owner...
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