Abstract :
Agency problems arise when there is a conflict of interests in any given relationship where one party is expected to act in the best interests of the other party. In the corporate world, agency problem refers to a conflict of interests between the company’s management and its members. This is where corporate governance comes in to handle the issue of alignment of interests. Members’ rights are best protected when the interests of the company and its Directors are closely aligned. The Director is supposed to make decisions that will maximize the company’s profit rather than seek to fulfil one’s own personal interests. The response to this problem is manifold–whether it be internal reforms by bringing in Independent Directors to the company, or putting more emphasis on disclosures so as to keep a check on the Directors.
Keyword :
ALIGNMENT OF INTERESTS OF DIRECTORS VERSUS INDEPENDENT BOARDS.