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Agency Theory and the Design of Efficient Governance Mechanisms

Sakhri, Mohamed

Abstract:

The purpose of this paper is to analyze the mechanisms by which corporate boards may fail to provide the monitoring and ratification of managerial decision in public and private corporations.

The paper creates a framework for thinking about the problem of designing efficient governance mechanisms that is based on the theory of agency. Mechanisms by which boards can fail to provide efficient governance of the firm via monitoring and ratification of managerial decisions are analyzed, and the framework is used to supply structural and behavioural interventions designed to make boards better agents for the shareholders. As with any such theory, the framework can also be used by managers to either strengthen or weaken their boards’ powers of monitoring, ratification and sanctioning of managerial decisions. It can also be used by shareholder groups to design effective contractual structures that bind boards to their mandate, and by boards themselves to understand the ways in which top managers and shareholders can bind them to their mandate and ways in which they could function more efficiently.

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Document Title: Agency Theory and the Design of Efficient Governance Mechanisms
Project Title: Agency Theory
Institution: Paris Graduate School of Management
City and Country: Hassi Messaoud, Algeria


Date:2010
Document Type:Research Report (Peer Reviewed)


File Size:147 KB
Date Added:09 September 2010


Sakhri, Mohamed (2010). Agency Theory and the Design of Efficient Governance Mechanisms.