Agency Theory

Agency theory is one of the key concepts underlying the wideness of corporate governance, which has taken prominent role in telephone line activities in the last few decades. It has its roots in soaked to every aspect of business activities and plays a very of the essence(p) role in decision-making by directors ( two executive and non-executive directors). search into possession of shares in FTSE 100 companies (London stock exchange), indicated that less than cinque per centum (5%) of all shares in FTSE 100 companies were held by management of much(prenominal)(prenominal) companies, and regular(a) in most cases management shareholdings came about as a result of share option in the do spend a penny 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 situation theory has become a lot to a grea ter extent important now than ever sooner, 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 some(prenominal) financial institutions in new-fashioned months as a result of the global financial crisis.

slews of companies have been nationalised in recent times than ever before across all developed economies, such companies include cap 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 inclu des: Equity investors are deemed to be the ! owners of the company They have voting rights in general meetings In case of profit, they may cause 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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