Agency Model in Corporate Governance

Adam Smith was a Scottish economist and philosopher, also known as ”The Father of Economics”. Smith wrote two classic works,  one of them called The Wealth of Nations, which is considered the first modern work of economics.

“The directors of companies, being the managers of other people’s money rather than their own, cannot well be expected to watch over it with the same anxious vigilance with which (they) watch over their own. ”

– Adam Smith, The Wealth of Nations, 1776.

I use this quote as a segway to talk to my students about the economical framework that underpins corporate governance.  There are numerous theories, but the one I focus on the agency theory.

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