Question

“One way to reduce the agency problem is to understand what motivates the agents (managers)”. Discuss this statement using the Agency theory and Maslow’s hierarchy of needs model

Answer 1

Agent theory: Agent theory is developed to explain the relationship between agents and business principles to resolve their issues.

Maslow’s hierarchy of needs model: Maslow's tried to explain the various needs in a continous pattern like the primary need is oxygen,food and water then the secondary need is to get into a safe place or have a house and for running our live we need a income source and this means job stability.

Agent theory explains the relation between issues and principles. For maintaining job stability and fear of losing job motivates agents and this defines the agency problem.