Divorce Of Ownership And Control Flashcards
1
Q
Define Divorce of ownership and control
A
When the owners and those who manage the firm are different groups with different objectives
2
Q
Who does the divorce of ownership and control apply to?
A
PLC’s
3
Q
What problem does the DoO lead to?
A
The principal agent problem
4
Q
What is the principal agent problem?
A
An agent may act in a way that is contrary to the best interests of the principal.
5
Q
What is the principals priority?
A
Dividends
6
Q
What is the Agents priority?
A
Business success
7
Q
What are ways to solve the principal agent problem?
A
Give employees shares
Increase shareholder activism
Taking shares of the market
Satisficing: Enough rather than maximise
