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Common examples of this relationship include corporate management (agent) and shareholders (principal), elected officials (agent) and citizens (principal), or brokers (agent) and markets (buyers and sellers, principals). [4] In all these cases, the principal has to be concerned with whether the agent is acting in the best interest of the principal.
The interests of the shareholders may have favored funding the compensation scheme earlier than the directors were willing to. [28] This divergence in interest, even where it address an issue of corporate social responsibility rather than strictly monetary concerns, could be considered an example of agency cost.
[2] [3] [5] An example of corresponding levels of gratification would be a situation in which person A and person B both simply attempt to achieve outcomes in their own best interests, but in so doing also achieve outcomes in the best interest of the other. An example of conflicting gratification is a situation where all outcomes that are ...
The business judgment rule is a case-law-derived doctrine in corporations law that courts defer to the business judgment of corporate executives. It is rooted in the principle that the "directors of a corporation ... are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fides regard for the interests of the corporation whose affairs ...
Principals within a firm want their agents to work for the principals' best interests, but agents often have different goals than the principals. [30] Due to this problem of misaligned incentives, firms must design compensation plans to induce workers to act in the firm's best interest and generate a level of output that maximizes the firm's ...
Nuclear power is a textbook example of the problem of "regulatory capture" – in which an industry gains control of an agency meant to regulate it. Regulatory capture can be countered only by vigorous public scrutiny and Congressional oversight, but in the 32 years since Three Mile Island, interest in nuclear regulation has declined precipitously.
Although he never used the words "collective action problem", Thomas Hobbes was an early philosopher on the topic of human cooperation. Hobbes believed that people act purely out of self-interest, writing in Leviathan in 1651 that "if any two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies."
Examples of a company's internal and external stakeholders Protesting students invoking stakeholder theory at Shimer College in 2010. The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. [1]