How to solve the problems in the principal-agent relationship of the company

Under the decentralized shareholding structure, the core principal-agent relationship of corporate governance is the agency problem between shareholders and managers. Under the condition of decentralized ownership, the manager becomes the actual controller of the company. When both parties pursue the maximization of their respective interests, the problem that the interests of the manager as an agent are inconsistent with the interests of shareholders, that is, the interests of the principal, arises. This issue has become the core issue of corporate governance. At this point, the main problem to be solved in corporate governance is how to prevent other shareholders from hitchhiking.

From the above point of view, we can draw the following conclusions: because the interests of the principal and the agent are inconsistent, the contract between the two parties is incomplete, the information is asymmetric, and the agency cost is inevitable. In order to reduce the agency cost, we must establish a perfect incentive and restraint mechanism for agents, so that the interests of managers are consistent with their own.

With the development of commodity economy and market economy, the organization or form of enterprises is constantly developing and changing, and individual owner enterprises, partnership enterprises and corporate enterprises have emerged. Modern companies (joint-stock enterprises) can better meet the requirements of socialized mass production under the conditions of market economy. Shareholders of joint-stock enterprises have the ownership of the enterprise, but they do not participate in its operation. Operators have control over decision-making and management of business activities, and enterprises are characterized by the separation of ownership and management rights. Principal-agent theory is a powerful explanation for the separation of enterprise ownership and management right.

Principal-agent is to study the relationship between operators and owners. The principal-agent relationship in modern companies mainly involves principals and agents, the former refers to shareholders, and the latter refers to directors and managers. Since Coase put forward the theory of enterprise essence, the agency problem in such enterprises has been an important topic for economists to study. According to the agency theory, the agent and the principal are two different people, and there are two aspects of asymmetry between them: one is the asymmetry of interests. Shareholders pursue the maximization of company profits and shareholders' rights and interests, while managers, as agents, pursue the maximization of personal income, the improvement of social status and reputation, the expansion of power and comfortable conditions. Second, information asymmetry. The information the client knows is limited, while the agent has obvious advantages in mastering information.