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Give examples of agency conflicts between shareholders and managers for Korean companies.

Give examples of agency conflicts between shareholders and managers for Korean companies.

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Answer #1

1) The agency conflict usually refers to a conflict of interest between a company's management and the company's stockholders.

2) The manager, acting as the agent for the shareholders, is supposed to make decisions that will maximize shareholder wealth even though it is in the manager’s best interest to maximize his own wealth.

3) The agency problem arises due to an issue with incentives and the presence of discretion in task completion. The manager may be motivated to act in a manner that is not favorable for the Shareholders if the manager is presented with an incentive to act in this way.

4) One of the examples is a Korean company "Chaebol" which is a large industrial conglomerate that is run and controlled by an owner or family in South Korea.

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