Perceived managerial discretion and market competition Research Paper

Perceived managerial discretion and market competition (Principal-agent problem) - Research Paper Example According to the agency theory, the principal-agent problem arises from conditions of incomplete or asymmetric information when one party tries to motivate another party to act on its behalf. These conditions can be observed in any employer/employee relationship. This is because the employer, the shareholders, wants the employees, the managers, to invest in those projects which offer higher returns. However the projects which offer higher returns also have higher uncertainty. Therefore the managers may not want to take the risk. As a result there is a conflict of interest which affects organizational objectives. This is the principal-agent problem which is addressed in the agency theory. In order to maximize organizational performance, the owners of the organization have to introduce incentives which will motivate the managers/employees to act in the best interests of the shareholders. Therefore the motivations of the principal and its agent are aligned strategically. In the current business environment, change is the only constant. Therefore the organizational structure has to be flexible so that the organization can remain competitive in spite of the changes that are taking place in the external environment. A flexible organizational structure enables the principal and the agent to mobilize resources fast so that fast responses to market changes become possible. However if there is a conflict of interest between the two parties, then this objective cannot be attainable. The presence of the principal-agent problem also means that the shareholders are unable to monitor the decision-making process so that the managers are tempted to apply organizational resources to personal gains. This is a limiting factor for organizational performance. Therefore it is critical to address the principal-agent problem. Particularly in the present day business environment which is characterized by high competition, application of the agency theory becomes one of th e key success factors. By incorporating the agency theory, organizational stakeholders create an internal structure which is strategically aligned. Given the fast pace of change in the external environment, both the shareholders and the officers would want to create a sustainable competitive advantage. In order to meet this objective, the management of the company has to optimize the decision making process so that it addresses the interests of both parties. According to Michael Porter’s framework for strategy formulation, an organization can implement three strategies to build a competitive position: focus, differentiation and cost minimization (Hill & Jones, 2007, p. 18). However the effectiveness of strategy implementation is limited by the principal-agent problem. This underscores understanding of the agency theory. By applying the agency theory, the management can align the interests of both parties to synergistic effects. As a result, the organization can

Covenants Land law Essay Example | Topics and Well Written Essays - 1250 words

Covenants Land law - Essay Example The main concern in this case is whether or not Sarah is able to enforce the covenant to Oliver who will only own the land for a particular period which is 50 years. The answer is definitely no. Sarah does not have any legal ground to enforce the covenant to Oliver since the covenant between Leonard and Mary did not apply to Oliver2. However, Sarah has all the legal grounds to enforce some penalty to Mary for the bridge of covenant. The reason is that Mary had not sold off the land to Oliver. Therefore, the covenant is still biding, what she did was to lease the land to Oliver, but not sell it to him. What this means is that the covenant is still binding and Mary has to take the responsibility to ensure that the restrictive covenant signed between her and Leonard is upheld. Therefore, the piece of advice to Sarah is to get hold of Mary and charge her with the responsibility3. However, this should be noted that it is the covenantee who enforces the covenant to the covenanter. This will be in exception incase the deed was designed to provide that the covenanter is not in any way liable incase there is a breach in the covenant after he/she has sold the land. However, this is not applicable in this case because Mary had not sold the land In the second case regarding Ned, the covenant they agreed on was one that denied him the right to use the plot for commercial use. However, when Ned sold the plot to Phillip he went ahead to use it for commercial use where he offered yoga and log cabin services. This is a little complex since Ned sold the land to Philip. It can even be more complex incase Ned cannot be easily traced4. Sarah may not be able to enforce the covenant on Philip since there was no any transaction between them. However, if Sarah can be able to reach Ned then she can be able to compel her to make the same agreement with Ned. In fact, it may be difficult for Sarah to