Agency Theory

Agency theory is one of the key concepts underlying the brilliance of corporate governance, which has taken prominent role in melody activities in the last few decades. It has its roots in secretive to every aspect of business activities and plays a very life-or-death role in decision-making by directors ( two executive and non-executive directors). inquiry into possession of shares in FTSE 100 companies (London stock exchange), indicated that less than flipper per centum (5%) of all shares in FTSE 100 companies were held by management of much(prenominal)(prenominal) companies, and still in most cases management shareholdings came about as a result of share option in the do convey of bonuses. From the above discussion it means the general public (that is two study/ institutional investors and small shareholders) holds the majority of shares in listed companies or else than management. The concepts of delegation theory has become a lot to a greater extent impo rtant now than ever sooner, in particular with the corporate collapses of major multinational companies such as Enron in 2001, WorldCom in 2001, Lehman brothers 2008, and the nationalisation of m any(prenominal) financial institutions in upstart months as a result of the global financial crisis.

stacks of companies have been nationalised in recent times than ever before across all developed economies, such companies include capital letter mutual, Bradford and Bingley, Northern disputation etc. To understand the concept of agency theory it is important to short discuss the characteristics of ordinary shareholders or equity investors of companies, some of such characteristics include s: Equity investors are deemed to be the ow! ners of the company They have voting rights in general meetings In case of profit, they may become dividend later tax In case of liquidation, they are the last in be to receive anything from their investment in shares The whole the share investment is non secured against any of the companys assets, and predominantly not redeemable. A shareholder...If you indigence to get a full essay, frame it on our website: OrderEssay.net

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