The advisor might invest it in an annuity, to also earn a higher commission. On your end, you could offer a higher compensation right away, based on your relationship with the advisor. As a company officer or representative, you may be tempted to increase your share prices to raise the company value. It is unethical, but many companies do it through miscalculations in reports.
Your shareholders invest more capital into the company, expecting a greater return to make more money. This conflict of interest takes away the transparency that is required in maintaining the principal-agent relationship. Share Blockchain eliminates agency costs such as supervising agents by creating a trusting relationship between the agent and the principal.
The participating principals and agents will have guarantees that directly address corporate governance problems. Given the blockchain guarantees, this kind of technology allows for a different solution to agency problems. Blockchain and its security system are immutable, which creates trust between the parties in their contractual relationship.
Therefore, no party can bend the rules in the blockchain code. The principal has no reason to monitor agency costs since blockchain addresses the agency problems in corporate governance. Agency governance continues without intermediaries in the blockchain such as principal control, third-party risk, and intermediaries, as well as market performance and private investors. Controls and verifications, including regular meeting with shareholders, finance disclosures, financial press, and hedge fund investors, are no longer needed in the blockchain.
If you need help with an agency problem in corporate governance, you can post your legal need on UpCounsel's marketplace. For instance, an electrician is going to be hired by a principal. Here the agent is the electrician. The best interest of the electrician is to pluck as much money as possible by performing his duties. Nevertheless, all the actions that the agent is going to perform benefits to the principal. The agency problem occurs because of the issues with the incentives and the task to be completed in the discretion.
At times the agents can be prompted to function in a way that is unfavourable to the principal. This happens specifically if the agents are given with the incentives to act as such. For instance, drawing from the example mentioned earlier, the electrician may go onto talk about a service which is absolutely not necessary. He might be tempted to do this as there is an incentive, causing the agency problem to string up.
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