Agency Challenges

Information asymmetries: How to protect shareholders (owners) against value-destroying managers (fraud, unacceptable risk-taking, mismanagement/moral hazard);
‘Agency costs’ relating to the costs of monitoring (checks and balances on information asymmetries), bonding costs (keeping managers aligned and accountable through contracts, profit-sharing and performance-related pay) and other residual costs;
Internal control mechanisms: Decision-making and representation structures/corporate governance;
External control mechanisms: public financial statements and accountancy control.

Typical Strengths

Relatively easy access to risk-bearing capital;
Mitigation of risk due to limited liability;
Transferability of shares/ownership;
No restriction of members;
Flexibility;
Efficient production and scaling;
Creation of (new) markets;
Competition;
Innovation (technologies; products; processes; organizational);
Risk-taking and risk management;
Generation of surpluses (profits);
Generation of spill-overs through applied mode of organizing: outsourcing, delegating, cooperating with suppliers.

Short-term orientation (profit driven);
Market concentration / monopoly surpluses / collusion / insider trading;
Fickle societal license to operate (trust; reputation);
Too big or too diversified to create value;
Too much risk-taking: high risk = high wins or high 'penalty';
Deficient capacity to internalize external costs;
Global free trade excesses: ‘race to the bottom’, ‘footloose capital’, tax evasion and manipulation; natural resource exploitation;
Abuse of information asymmetries and market power (e.g. misuse of patents on medicine, seeds).