2.2 Govenance theory related to board structure

Question 1

A_______ t_______ recognises that boards are the fiduciaries that resolve the agency problem inherent in a separation of ownership and control of public enterprise.

Answer 1

Agency theory

Question 2

Who is the agent and who is the principal in an agency relationship?

Answer 2

The principal is the person engaging another person (the agent) to perform a service on their behalf).

Question 3

What is stewardship theory, and how does it differ from agency theory?

Answer 3

Stewardship theory holds that there is no conflict between managers and owners and that a structure is required to enable coordination. Meanwhile, agency theory provides that there is a conflict of interest, and that managers require financial and non-financial motivation to succeed.

Question 4

What is stakeholder theory?

Answer 4

A recognition that organisations need to take account of the various stakeholder relationships with many different groups. The board structure needs to reflect these relationships.

Question 5

While it is important to have appropraite s________, they are not enough to ensure good g___________.

Answer 5

structures

governance