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Do Senior Agents Represent Themselves More than Other Stakeholders?

Clearly, growth through acquisition was not the best path to increasing shareholder return, yet acquisitions continued at an aggressive pace for over a decade. This appears to be a problem of "Agency Costs" when agents for the firm consume corporate perquisites at the expense of other stakeholders.28 For example, managers may choose to fly first class or pay themselves large bonuses. Other agents, such as investment bankers, may drive deals to generate fees irrespective of whether value is created for their clients. In the case of the Daimler Chrysler merger, Goldman Sachs received a reported $65 million in fees, whereas CS First Boston received approximately $55 million.29 Other examples may include management that chooses to acquire companies for personal benefit. Management at the acquired firm often gets fired as part of the cost reductions with a horizontal (similar industry) consolidation. Thus, completely independent of cost savings or market share issues, management from the acquiring firm may believe that there is job security, as well as personal financial gain, to be found in buying other organizations.

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