Solution to the Agency Conflict
The government can acquire the following actions to protect itself and its interests.
1. Acquire monitoring costs
E.g. the government incurs costs associated along with:
- Statutory audit
- Investigations of companies within Company Act
- Back duty investigation costs to recover tax evaded in the previous
- VAT refund audits
2. Lobbying for directorship representation
The government can lobby about directorship in companies that are deemed to be of strategic nature and significance to the entire economy or society.
3. Offering investment incentives
To encourage investment in provided areas and places, the government suggests investment incentives in type of capital allowance like laid down in the Second schedule of Cap 470.
4. Legislations
The government has given legal framework to govern the processes of the company and provide security to specific people in the society like regulation associated along with disclosure of information, salaries and minimum wages, environment security etc.
5. The government can uncalculated the sense and spirit of social responsibility on the behavior of the firm, that will eventually good for the firm in future.