Ownership, Control and the Principal-Agent Problem: Exploring the Stakeholder Model

The video discusses the divorce of ownership from control, focusing on the principal-agent problem where management (agents) may not act in the best interest of shareholders (principals). It explores solutions like aligning incentives and increasing transparency. The problem is illustrated in political and public sector contexts. The stakeholder model is introduced, highlighting how various parties influence business operations.

What is meant by the 'divorce of ownership from control' in a firm?

Explain the principal-agent problem and its implications for large firms.

How do self-interests of shareholders and management lead to conflicts?

What are some reasons why managers may not act in the best interest of shareholders?

Discuss how aligning incentives can help mitigate the principal-agent problem.

What role does asymmetric information play in the principal-agent problem?

Provide an example of the principal-agent problem outside of a corporate context.

How can increased shareholder activism address the principal-agent problem?

What are stakeholders, and how do they influence the operation of a business?

In what ways can the government act as a stakeholder in a business?