Agency theory Essay Example | Topics and Well Written Essays - 4000 words

Agency theory - Essay ExampleAt this stage, agency theory is superseded by what is called stakeholder theory. The same not having been clearly defined, ultramodern scholars advocate the theory called enlightened stakeholder theory which seeks to remove the shortcomings in the traditional stakeholder theory so that managers who could take shelter under the traditional stakeholder theory and reverse accountability, are now compelled to show performance for value maximisation in the long run. This is sought to be achieved by active participation of agents/managers through puritanical motivation and communication with a scorecard on hand. Thus the enlightened theory would go a long way in plugging the loopholes in the collective governance occurring in spite legislations like Cadbury report, Greenbury report in the U.K. and SOX Act in the U.S.A.Corporate Governance is a much-discussed issue of public importance, of late. One side of the issue is the corporate ownership and control w hich this proposal deals with. In the discussion here, the word corporate is loosely described as firm, company, corporation etc, which all interest to public-owned companies listed in stock exchanges. Share-holder activism all over the global corporate environment has given rise to the study of corporate ownership and control and their impact on the performance of the corporates. By 1990 Corporate Governance had become a household name in the United States of America when a California based indemnity fund company California Public Employees Retirement System (CalPERS) that had invested members funds in the divisions of leading companies, pioneered by questioning those listed companies practice of buying back shares from the share holders at higher prices which meant draining of companies capital and in turn reduction in value of shares held by them. This was soon followed suit by many modern companies representing widely dispersed shareholders around the world