Describe the system of legal responsibilities among shareholders, the board of directors, and top managers in large, public U.S. corporations. Then explain how, in practice, agency problems arise that...

RUNNING HEAD: AGENCY PROBLEM 1
Agency Problem
AGENCY PROBLEM 2
Agency Problem
System of legal responsibilities among shareholders, the board of directors and top
management
The legal responsibilities among the shareholders, the board of directors and top
management needs to be as per the corporate governance of the organization. The fundamental
responsibility of the board of directors is to supervise the management, so that they are able to
create sustainable value to the shareholders. It includes fair reporting, ethical and legal corporate
conduct by maintaining an appropriate system of corporate governance and internal control over
the financial reports of the company. (Babic, V, 2001)
Agency problem
The shareholders focus on maximizing their wealth whereas the management focuses on
maximizing the...