Question
The agency problem arises in a situation where an agent, a director of a company, does not act in the best interests of a principal,
The agency problem arises in a situation where an agent, a director of a company, does not act in the best interests of a principal, a shareholder. When a principal chooses to act through others and its interest depends on others, it is subject to an agency problem. Lehman Brothers' employees' have very small piece of the company ownership. This is one way to reduce agency costs and to align an agent's interest with a principal's interest, considering that the agency problem arises due to divergent interests. Is this an effective way to mitigate a agency problem? Please explain.
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