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- Title
A Possible Solution to the Principal-Agent Problem Posed by the Contemporary Corporate CEO.
- Authors
Bruhl, Robert H.
- Abstract
Current events clearly show the need for a critical reexamination of the means used to manage corporate governance, and to this purpose I would offer the following thoughts on a different approach to managing the Principal-Agent Problem posed by the contemporary CEO. The Principal-Agent Problem is this: when you (the principal) hire someone (the agent) to look after your affairs, that individual will naturally be most concerned about his or her well-being, and may sacrifice your interests in favor of his or her own interests whenever a conflict may occur. Thus to insure that your interests are being properly attended to, you must police the activities of your agent, which then means that you would have been better off doing the agent's work yourself. The CEO of the contemporary corporation is the agent of the stockholders, and the potential for conflict to occur between the interests of the CEO and the stockholders is patently obvious and potentially ruinous.
- Subjects
CORPORATE governance; EXECUTIVE compensation; INDUSTRIAL management; CHIEF executive officers; RATING of executives; INVESTOR relations (Corporations); STOCKHOLDERS; JOB evaluation; CONFLICT management; INTERPERSONAL relations
- Publication
Journal of Business Ethics, 2003, Vol 48, Issue 4, p401
- ISSN
0167-4544
- Publication type
Article
- DOI
10.1023/B:BUSI.0000005797.58349.d3