The agency problem
Taught by Peter Woolley · AI tutor support included
In this lesson, you'll learn what the agency problem is and why it matters in corporate governance. The agency problem arises when agents (like CEOs) act in their own interests rather than those of principals (shareholders), creating a conflict that can damage long-term value.
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In this lesson
- 0:00 Understanding the agency problem
- 1:26 How agency problems occur
- 2:30 Risk appetite and moral hazard
- 4:30 Solutions to align principal and agent goals
- 5:40 Shareholder activism and organisational culture
About this lesson
You'll explore the key causes—information asymmetry, misaligned goals, different risk appetites, and moral hazard—and discover practical solutions including aligned compensation, board monitoring, regular communication, board independence, shareholder activism, and strong organisational culture. Understanding how to identify and mitigate agency problems is essential for Strategic Business Leader and other advanced papers where corporate governance and stakeholder management are tested.
Duration: 7m
Transcript
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