ACC 333 Lecture Notes - Lecture 3: Invisible Hand, Management Control System, Joint-Stock Company
7 Sep 2016
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Performance measurement systems and discussion of assigned reading. Relationship between the agent and the principal: agent acts on behalf of the principal. Agency theory deals with the conflict of interest between the agent and the principal: is the agent (ex ceo) acting in the best interest of the principal (ex shareholders) or in the best interest of himself. Knowledge that is not easily obtained, transferred, or understood. Scientific knowledge which helps us to break down and understand why. Assembled knowledge is knowledge we have personally assembled through experience that is specific and unique to us. Decisions made by a higher power whether it be government or c suite executives. Costs due to inconsistent objective are lower at a high degree of centralization. Costs due to poor information are higher at a high degree of centralization. Delegation of decision rights to others: spread of knowledge and decision making ability to minimize agency problems.
