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Essay / Research Paper Abstract
This 8 page paper examines the principle-agent relationship that takes place between the management and staff of a company. The paper explains what the relationship is and how it manifests, looks at what is meant by agency costs and considers how elements such as moral hazard, adverse selection, asymmetry of information and signalling are seen I the way the relationship ship is run. The paper ends by considering how the employer should management the relationship.
Page Count:
8 pages (~225 words per page)
File: TS14_TEprincagent.rtf
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Unformatted sample text from the term paper:
one of these relationships. The main characteristic and problem, of this relationship is the conflict in interests. Employers need to overcome the problem of asymmetry of information in the recruitment
process to reduce the potential of adverse selection. Agency costs start with the recruitment process but also include the monitoring of the contract and misbehaviour costs. The use of
tools such as the human relations school of management allows for the employer to consider the employees needs, where this is undertaken and employees feel valued there may be increased
trust, so a low level of monitoring is needed and misbehaviour costs will be lower. In short, the employer that can alight the employees interests with their own goals is
likely to reduce agency costs and create more value in the principle agent relationship for both parties. 1. Introduction The employment relationship is one that is often fraught
with conflict and can be difficult to manage. Where the relationship is managed poorly the result can be a lack of common goals, poor profitability or even losses and may
deteriorate into industrial action and sabotage. Where relationships are managed more effectively throughout the contract of employment even were different goals exist common ground can be found and the relationship
can be beneficial to both the employer and the employee. A useful framework that can increase understanding of how the employer employee relationship should be perceived is that of the
principle agent framework. 2. The Principle Agent Relationship A principle agent relationship exists where one party, known as an agent, is working on behalf of another party, known as the
principle. The agent should be working to the goals o f the principle and under their instructions, but the agent will have a level of autonomy. In effect this relationship
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