There are two types that principle can cope with the agent when they don’t
behave according to the principle interest. The first one is called the control-oriented
approach and second one is called the arm’s length approach. The former one tends
to fit with the company that owns by a large block shareholder and latter one is for a
diverse shareholder company. For the latter one, when there is a problem, shareholder
tends to sell their share as a way out (as a consequence, when the share price fall, the
company can be easily targeted for a hostile take-over, but the former one the
shareholder tends to exert their control through the replacement of management.