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6. Who owns a corporation? What is the process whereby the owners control the firm’s management....

6. Who owns a corporation? What is the process whereby the owners control the firm’s management. What is the agency relationship that exists in a corporate organization? What agency problems can arise?

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Answer #1

Equity share holder will be owning the Corporation and they will be having the voting rights in the company and they will be trying to influence the decision making of the company by voting their choices in the management and they will be trying to govern the company by using their voting power so they are the ultimate owners of the company

Agency relationship that exists in the corporate organisation is that shareholders are the principal and managers are their agents, so shareholders will be trying to manage their interest through managers.

Agency problems can arise when managers will be acting in his own interest rather than acting in the interest of shareholders and he will be taking excessive risk and he will also provide himself with excessive compensation then it could be leading to agency problems

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