classify the ways in which the Agent theory influences the practice of good corporate governance in the corporations today and explain.   

Kindly check the answer below.

Step-by-step explanation

The mechanism through which a corporation is guided and managed is known as corporate governance. As a result of this structure, the rights and obligations of various business stakeholders, such as shareholders, managers, board directors, and so on, are clearly defined and laid forth.

Agent-principal connections are studied in agency theory. In an agency relationship, there are two parties: the agent and the principle. The agent acts and makes decisions on behalf of the principal. According to the hypothesis, there may be conflicts between their differing risk perceptions and company objectives.

If you're in the financial industry, you've probably heard of the most talked-about agency connection between shareholders and corporate management. Corporate governance's agency theory identifies and describes procedures for reducing agency loss that might result from an agency issue.

Strategic choices in corporations and boards of directors are guided by the boundaries set out by the agency theory. Decision-makers who are prone to greed and profit at the cost of the organization may find this tool useful. Additionally, it may serve as useful guidance when a company's long-term goals collide with those of its stakeholders.

• Protocols for making decisions.

It is theoretically possible to have a say in significant corporate decisions if you purchase shares in a corporation. Because some shareholders own only one share, they only have one vote, while others own thousands of shares, they only have thousands of votes. Executives and members of the board of directors should represent all shareholders, although those who own the greatest shares may be overrepresented. Steps toward understanding these complicated and frequently contradictory commitments may be found in agency theory.

• Greedy Executives 

When it comes to matters of corporate compensation, those in positions of authority frequently stand to gain directly from the choices that are being made. Pay and incentives for CEOs should be high enough to incentivize and reward them for doing high-quality work that increases shareholder value. There are times in the real world when the bottom line is sacrificed in order to pay out hefty corporate compensation.

• Short-term vs. long-term interests.

Investment in the future is typically in the best interests of a firm, but it often comes at the sacrifice of short-term gains, such as dividends to shareholders. Executives that adhere to the corporate agency theory make the best decisions for the company as a whole by drawing on the experience and education that got them to this point in their careers.

• Agent-principal interactions may be better understood with the aid of agency theory. There must be no concern for self-interest when the agent acts on behalf of the principal in a specific commercial transaction. Principals' and agents' differing interests may lead to conflict if agents do not always operate in the best interests of the principals they work for. Misunderstandings and misunderstandings in the workplace may lead to a variety of issues and rifts. This may lead to inefficiencies and financial losses when conflicting interests force a wedge between the many stakeholders involved. The principal-agent issue arises as a result.