How might a company configure its corporate governance systems and its strategy-making processes to reduce the probability that managers will pursue their self-interest (agency behavior) at the expense of stockholders?

1. How might a company configure its corporate governance systems and its strategy-making processes to reduce the probability that managers will pursue their self-interest (agency behavior) at the expense of stockholders?

For a company to limit matters of urgency, it must practice appropriate and acceptable checking and control. For any organization to effectively regulate top managers’ activities, the executive must participate in the process of making strategies, especially in their advanced stages, and should be responsible for ensuring that the chosen policies benefit the organization. On a similar note, the executive should guarantee accountability in the supervision of top managers’ activities in the organization to ensure that they are working on the same plan. The panel that does this work ought to comprise of professionals from external entities and large teams of stakeholders. Another tool that can be used to perform this task is strategic control, which, when properly utilized, ensures that the low-ranked managers can formulate policies, create systems for regular measurement, and assess the results. For quick and effective implementation of the said system, there ought to be some sense of centralization; many of the decentralized companies do not give satisfactory oversight and always result in difficult situations in the organization whenever there is a discrepancy..

While seeking refuge in the typical stick and carrot hypothesis, there may be two distinct ways through which this issue can be dealt with. The company can establish a solid investor depiction in the process of making relevant procedures just as the system of surveys. All through these lines, the investor depiction will considerably make correct inquiries to ensure there is some improvement underway. This tool can be successful to some extent. However, it does not guarantee absolute commitment from company administrators. The success of this technique is also dependent on the investor depiction’s right determination and what power and authority they exercise over the entire procedure. The best thing to do in this matter is to make considerable adjustments on administrators‘ rewards depending on the same parameters used by the investor.