The Principle-Agent Problem, To Manage Incentive You Have to Understand Motivation.

 

What Is the Principle-Agent Problem?  Here is some help.   https://www.youtube.com/watch?v=cpu0dw9VY2E

 

Here is our case study this week.   https://www.nbcnews.com/business/business-news/another-wells-fargo-ceo-steps-down-about-damn-time-longtime-n988671

 

This week we look at the principle-agent problem and what when wrong at Wells Fargo. After another CEO Tim Sloan the CEO who was suppose to restore the bank’s reputation stepped down March 28, 2019 there are still huge questions. https://www.americanbanker.com/news/fed-wont-lift-wells-fargo-cap-until-deficiencies-are-fixed-powell

 

What about the incentive system resulted in massive creation of fake accounts by the retail operation and why did it only get worse from there? As you dig into this remember Froeb’s rule from Chapter 1″Avoid the temptation to think about the problem from the employee’s point of view…{and ask} how does the organization give employees enough information to make good decisions and the incentives to do so?” page 8