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Wk7.pptxAgency Theory and Corporate Governance
What’s at stake for the key parties, including those with whom Daniel disagrees?
The key participants are principal and agent. In case of the principal, it could mean less money in the
long term, depending on packet they structure. The case of the agent it could mean their morals
could be compromised because they could follow the monetary value individually instead of what
is best for the organization.
Most of the time when ever there is a choice to make between your personal gain or the organization,
the personal gain takes priority. This does not mean that the organization always looses because if
you are a founding member or a board member it could mean that your personal gain is an
organizational gain.
If there is any question in your mind about this topic think of a time at work in which you had the
choice for the organization you work for to gain something, but it would cost you personally. On the
other hand, you gain personally however, the organization will lose something? I can personally say
when I am at work, I pick my personal gain.
Agency Theory and Corporate Governance
What are the main arguments Daniel is trying to counter? That is, what are the reasons and
rationalizations you need to address?
I believe Daniel is trying to not create a culture in which the profit margin always has the last say.
The means do not justify the end. Daniel was pointing out that the organization was created and
grew into what it is today without the need for such programs. He was also pointing out that
their products created a following because they focused on safety not profit. Profit was a byproduct
of what the company was creating.
In my opinion this is true, we can look at Tesla as an example in which they focused on creating
an electric car. This concept was not new however because they focused on their product instead
of their profit, they succeeded, and profit is a byproduct of this.
Agency Theory and Corporate Governance
What levers / arguments can Daniel use to influence those with whom he disagrees?
The first one would be that those programs do not currently exist and yet they are successful. The
second would be to analyze what those programs could possibly do to the organization and
its current dynamics? Just because something is or worked at a different organization it does not
mean that it will work here? What if the program does not work? Could the organization be able to
get back to a state prior to program implementation?
There are times in which an idea someone presents may seem like the correct choice at that time,
however, after some consideration it turns out it was not. Much like when shopping for an expensive
item it is always best to wait a certain amount of time and if you can do without you never really
required it you just wanted it.
Agency Theory and Corporate Governance
What is Daniel’s most powerful and persuasive response to the reasons and rationalizations he needs
to address?
The organization is successful without such programs. He could also suggest to tailor hiring personnel
who are organizational and team focused instead of individual success.
In today’s markets there are certain questions in which the answers they are looking for is a team
answer and nothing else will do. The phrase of “it is not my job” sort of went out the window in most
companies today. This is both positive and negative, positive in which most individuals can
function within teams. It is negative in that most people will rather do it themselves then depend on
incompetent personnel.
