How should the Theory of the Firm and Agency Costs impact our decision-making?

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The Theory of the Firm attempts to explain the how and why corporations exist. In its simplest form, corporations exist to maximize profits. As the economy grows increasingly complex, so have corporations.

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How should the Theory of the Firm and Agency Costs impact our decision-making? Discuss agency problems with the help of some real life examples (eg. Enron or Xerox Corporation).

Attached is the links to an article (Theory of the firm). It is a long article, 76 pages. The key to this reading is the first 12 pages, Pages 32 (starting at 2.6) to page 40, Page 45 (starting at 4.2) to 51, Page 60, and the last 2 pages (71 and 72). Read and reflect upon them. You may wish to do some research of your own using schloray articles. Make sure you support your statements.


Budgeting and Budgets are part of every organizations organizing and planning functions. Budgets are thought of as necessary to the execution of the Strategic Plan.

Are budgets a help or a hindrance to the execution of a Strategic Plan? Identify the limitations in traditional budgeting and discuss the suggested improvements.

Attached are links to the articles (Breaking the budget, Good Bye Traditional Budgetin. Read and reflect upon budgets. You may wish to do some research of your own. Make sure you support your statements.



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