Can a vehicle travel without a link to a source of power?"

Confucius

Agency problem is a worldwide problem wherever it is in western countries or China. It is inevitable during the development of the firm's organization. As long as the interests between the owner and management are not aligned, the conflict is existed. Many western firms have established the rules and incentive systems to prevent "agency problem". Somehow it works. We find it is not enough to overcome the problem.

China has undergone a long period economic reform. During the reform, how to improve the SOEs performance is a hot focus. In the past, all the SOEs were controlled by the government, what the companies' doing were decided by the government, then on one side the executives did not take the full responsibility for the company; on the other side, the officer blamed the managers for the bad performance. There are no clear boundary on the space of freedom and responsibilities. (see Georges Enderle) The "agency problem" became even worse because of this ph

6.How to solve the "Agency problem" from the view of business ethics in the "three levels"(Georges Enderle)?

4. Does incentives or regulations eliminate the " Agency Problem"?

By the definition of the "agency problem" in the SOEs in China, the managers assigned or appointed are the agents, who manage the assets of the principal.(the country) They have a lot of authorities regarding personnel, funds and fixed assets etc., but they don't have the corresponding responsibilities. The situation is a result of the mismatch of the space of freedom and responsibility as indicated by Georges Enderle.

The cost of "Agency problem" is obvious. There are the monitoring costs, bonding costs and the residual loss. Monitoring costs are costs incurred by the principle to monitor the actions of the agents (Ex. Annual report to shareholders). Bonding costs are costs incurred by the agent to ensure they will act in the best interests of the principals (binding employment contract). The residual loss is the implicit cost when management and shareholders' interests cannot be aligned, even when bonding and monitoring costs are incurred.

Some common words found in the essay are:
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Approximate Word count = 3626
Approximate Pages = 15 (250 words per page double spaced)