Question:
“As an internal control system, the board of directors has failed to function effectively in controlling the corporation. One major example of this failure is the extremely large compensation package given to the chief executive officer in most large corporations. Discuss.”
Your final submission should be in the form of a 2,000 word written essay.
The essence of the question is the "Principal Agent" problem in economics. How does the owner(s) of a business motivate a manager to operate with his best interests at heart.
- introduction - Outline the theory of the principal agent problem
- Explain how it relates to the example in the question
- What are the problems in implementing the principal agent theory in practice?
- using materials from academic authors and journal articles to support your views. 20 citations
Outline and principal agent problem outlining what would happen if you didn't pay people if you just pay people flat salary. Then what would happen if he gave them incentives, then look at some of the problems with incentives and then perhaps look at
How he could overcome some of those problems and as a broader topic, you could look at something called the triple bottom line where organizations don't just focus on profit now the focus on profit people and the planet.