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A top executive has said: “I am only concerned about the agency relationship between myself and the business owners. Any other agency relationships are not worth considering.”Do you agree or disagree with this view? Explain why or why not with supporting evidences. Identify and discuss the governance mechanisms that help align the incentives of owners and top executives.
Expert Answer
Disagree
An organization is an amalgamation of different departments and support services. There exist many agencies and support services that drive the organizational success. This requires having healthy
relationships with all agencies involved.
Having a skewed relationship with only the business owners will not derive organizational success as well as will hamper the implementation of strategic decisions.
For example, targeting solely on maximization of return to top owners often reduces the quality of the products and services offered.
