The Agency Problem: Measures for Its Overcoming
As the corporative company type emerged, the two functions of ownership and management are separated. In the companies with a large number of employees the managers are the ones that manage the capital in the best interest of the shareholders.In this type of companies, conflict of interest may occur between the managers and the shareholders. Having more information about the work of the company, managers may use it in making decisions for their own benefit, which on the other hand cannot be as beneficial for the shareholders.Conflict of interest between managers and shareholders leads to so-called agency problem. There are different ways by which shareholders can control the operations of management. Some of the measures that can be used to resolve and prevent this problem are subject of analysis in this paper.