ACCA SBL Course – Strategic Business Leader / Agency and Stakeholders

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In this video from our ACCA SBL course, we explore corporate governance and the agency problem in business. Corporate governance involves directing and controlling businesses to prevent failures, while the agency problem arises from the separation of ownership and control in large companies. Managers act as agents for owners or shareholders, but conflicts can occur. We delve into accountability, fiduciary duty, and agency costs. Examples of agency problem issues include high executive salaries, golden parachutes, poison pills, and non-business use of assets. The three main agency costs discussed are monitoring, bonding/contracting, and residual costs.

SUMMARY OF CONTENT
In this video extracted from our ACCA SBL course covers the concept of corporate governance and the agency problem in business. Corporate governance refers to the way businesses are directed and controlled to avoid corporate failures. The agency problem arises from the separation of ownership and control in large businesses, where managers and directors act as agents for the owners or shareholders. The passage highlights key terms such as accountability, fiduciary duty, and agency costs.

The agency theory focuses on the conflicts and problems that can arise between agents (managers, directors) and principals (owners, shareholders). Managers are expected to act in the best interests of the owners or shareholders and carry out tasks on their behalf. Agency costs refer to the expenses associated with monitoring and controlling managers, such as audit fees and the appointment of non-executive directors (NEDs) to oversee the business.

We also mention examples of issues related to the agency problem. These include high salaries for executives, golden parachutes (compensation agreements for executives in the event of a takeover), poison pills (contractual clauses that deter takeovers), and non-business use of corporate assets. These examples illustrate instances where managers may prioritize their own interests over shareholder wealth maximization.

The three main types of agency costs discussed are monitoring costs, bonding/contracting costs, and residual costs. Monitoring costs include expenses related to audits and the appointment of NEDs.

Bonding/contracting costs refer to the expenses incurred by managers in producing information for shareholders, such as financial statements and stock options for highly qualified directors. Residual costs represent the unavoidable expenses that principals must bear to engage experienced directors and managers, including incentive schemes.

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Видео ACCA SBL Course – Strategic Business Leader / Agency and Stakeholders канала Got it Pass