Stakeholder Conflicts Flashcards
(3 cards)
1
Q
What is the principal-agent relationship?
A
Created when one party hires another party to perform a task or service and can be present with or without a contract governing the relationship.
2
Q
What are agency costs?
A
Costs that arise as a result of conflicts where the interests of the principal and agent diverge. These can be direct, such as the costs of hiring monitoring agents, or indirect, like the forgone profits and economic benefits of lost opportunities.
3
Q
What are examples of diverging manager and shareholder interests?
A
Insufficient effort
Inappropriate risk appetite
Empire building
Self-dealing
Entrenchment
