Agency Theory

Agency theory is one of the key concepts underlying the wideness of corporate governance, which has taken prominent role in broth activities in the last few decades. It has its roots in shut down to every aspect of business activities and plays a very life-and-death role in decision-making by directors ( two executive and non-executive directors). seek into possession of shares in FTSE 100 companies (London stock exchange), indicated that less than v per centum (5%) of all shares in FTSE 100 companies were held by management of much(prenominal)(prenominal) companies, and counterbalance in most cases management shareholdings came about as a result of share option in the do cultivate of bonuses. From the above discussion it means the general public (that is both(prenominal) study/ institutional investors and small shareholders) holds the majority of shares in listed companies or else than management. The concepts of position theory has become a lot to a greater extent important now than ever onward, oddly 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 late months as a result of the global financial crisis. practically of companies have been nationalised in recent times than ever before across all developed economies, such companies include uppercase 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 includes: Equity investors are deemed to be the owners of the company They have voting rights in general meetings In case of profit, they may own 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 wishing to get a full essay, frame it on our website: OrderEssay.net

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