Towards an improved understanding of how multi-national corporations manage agency conflicts : the case of ArvinMeritor, Inc.
Master Thesis
2003
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University of Cape Town
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Abstract
Agency theory suggests that separating the ownership and control of a firm results in areas of conflict between the owners and controllers. This defines the firm as a nexus of contracts between various stakeholders with conflicting objectives. Management's task is to align the stakeholders and their objectives, so that actions taken maximise shareholder wealth and minimise the loss that residual claimants incur. These losses arise from inappropriate management decisions, and the costs incurred by owners to prevent such decision being taken. This situation is intensified for multi-national corporations, in that there are conflict areas related to geographical separation, cultural differences, varying levels of economic developlment, different accounting standards, exchange rae fluctuations and specific financial and operating risks. Despite this, mulit-national corporations continue to invest in a variety of countries and developing economies. This dissertation attempts to improve understanding of how these corporations manage the agency conflicts in such scenarios, and in so doing, achieve shareholder value. Given the limited scope of this research, the objective is to analyse the phenomenon of agency conflict in an appropriate real life context, and in so doing, propose answers to the research question. The research can be viewed as a pilot study or precursor to further research.
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Bibliography: leaves 96-98.
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Burton, A. 2003. Towards an improved understanding of how multi-national corporations manage agency conflicts : the case of ArvinMeritor, Inc. University of Cape Town.