Managerial compensations and models for solving agency problems

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Petar Dogandžić
Anja Dogandzic

Abstract

Managers, as holders of the management function, make decisions by which they manage a joint stock company, which should achieve results and goals that are in the interest of its owners or shareholders in the first place. During the work of the company, managers often make decisions that are primarily in line with their personal interests, while the interests of shareholders are put in the background. In order to solve or mitigate this problem, it is necessary to identify applicable and effective models. The paper especially emphasizes the importance of managerial compensations, based on the company's business results. The reward system is a strategic instrument that establishes the connection between the interests of managers and the interests of shareholders. To connect their interests, it is necessary to base compensation packages on a combination of different performance measures. In order to ensure quality corporate governance, it is necessary to form adequate control bodies for their work, as well as a set of rules or codes related to corporate governance. The combination of the above activities forms and maintains a good relationship between the owner and the manager with the realization of harmonized interests.

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How to Cite
Dogandžić, P. ., & Dogandzic, A. (2021). Managerial compensations and models for solving agency problems. BizInfo (Blace) Journal of Economics, Management and Informatics, 12(2), 153–169. https://doi.org/10.5937/bizinfo2102153D
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