Share
Explore BrainMass

What is Agency Theory?

Please help me add an example of an agency problem from a real-life lawsuit or situation.

What is 'agency theory'?

Agency Theory is the theory that describes the relationship between two parties in either the corporate or political world. In business, we say that employees of the company act as "agents" of owners, or shareholders, or the company. Often, we talk about an "agency problem" when the interests of employees are not the same as the shareholders. For example, executives paying themselves inflated salaries and large bonuses, while their company fails and the stock price plummets.

Thank you for your help with this!!

Solution Preview

In a real life publishing company, agency theory comes into play as advertising is sold. The sales people obtain commission from the number of ads sold. However, the company only grows if customers are happy, obtain ...

Solution Summary

Please help me add an example of an agency problem from a real-life lawsuit or situation.

$2.19