Social inequality and the principal-agent problem

Abstract

Social inequality has a lot of reasons. One of them is managerial. Managerial duties are paid so high that it set the stage for discontent not only within individual organizations, but also entire countries. The principles (the people in the state and shareholders in the corporation) because the specific structure of their competencies can’t totally control agents (officials and managers). As to agents, the moral imperative to act for the good of the social system and reputation considerations (to be remembered as a good ruler or a genius manager) can easily rejected when there is an opportunity to make millions dollars without special efforts. As a result hundreds thousands of people across the globe in the corporate and government structures are enriched through specific solutions to the principal-agent problem, and social inequality becomes an integral inevitable part of the modern economy.