Discussion #5

Discussion #5

Identify an incentive conflict in your firm, or one you have read about, that reduced firm value. As part of your answer, discuss whether or not one or more of the legs of the organizational stool was unbalanced, and if so, how that contributed to the conflict.

Reference:

Brickley, J., Smith, C., & Zimmerman, J. (2016). Managerial economics and organizational

architecture (6th ed.). New York: McGraw Hill/Irwin.

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Discussion 5

            Incentive conflicts emerge when the interests of various parties in an organization do not align. Firms are made up of various stakeholders, namely the management teams, employees, shareholders, and suppliers (Brickley, Smith & Zimmerman, 2016). These entities engage in several types of contract with the firms, thus have varying interests. Accordingly, each one of them wants the decisions made to enhance their well-being. However, this is not always the case as some of resolutions benefit some groups while disadvantaging others.

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