- 10 Marks
FINANCIAL MANAGEMENT – MAY 2021 – L2 – Q1A – Introduction to Financial Management
Discuss the agency problem in modern management, factors contributing to it, and strategies to mitigate it.
Question
Management of a limited liability company is appointed to promote and protect shareholders’ interest in the performance of their functions. The aim is to maximise shareholder value. Management, however, could have interests that might be incompatible and in conflict with shareholders’ interest.
Required:
i) Identify this type of conflict in modern-day management. (2 marks)
ii) Explain THREE (3) different factors that contribute to this conflict in (i) above. (4 marks)
iii) As a Management professional, explain FOUR (4) strategies that can be used to manage or mitigate this conflict to protect shareholders. (4 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Agency Problem, Conflict Resolution, Management Conflicts, Shareholder Value
- Level: Level 2
- Topic: Introduction to Financial Management
- Series: MAY 2021
Report an error