European Journal of Business and Social Sciences, Vol. 3, No.3 , pp 28-38, June 2014. P.P. 28 -38 URL: http:/ / www.ejbss.com/ r ecent.aspx ISSN: 2235 -767X EUROPEAN JOURNAL OF BUSINESS AND SOCIAL SCIENCES 28 “THE MORDERN CORPORATI ON” A THEORETI CAL REVI EW OF THE MODERN CORPORATI ON I N ZI MBABWE AND THE USE OF SHARE OPTI ON SCHEMES AS A WAY OF REDUCI NG THE AGENCY PROBLEM I N STOCK- MARKET LISTED COMPANI ES Wilford Mawanza Account i ng and Fi nance Department, Lupane St at e Universi t y P.O Box AC255, Ascot, Bulawayo, Zimbabwe Tel ephone +263973770 wilfordma@gmail.com ABSTRACT he main objective of this paper was to discuss the structure of the modern corporation, the nature of agency problem and the use of employee share option schemes in r educing the agency problem. The paper was done on a discussion basis, making use of the existing literature and existing evidence from media reports and company news. It was noted that design of executive compensation should align the interests of management with the shareholders and thereby induce managers to exert efforts to increase the firm’s value. An optimally designed scheme would seek to provide risk-averse managers with cost-effective incentives to exer t effort and make value-maximizing decisions. The ideal exercise price with respect to such a scheme should depend on a various situations that are likely to vary from executive to executive, fr om company to company, from industry to industry, and from time to time. Key Words: Agency relationship, corporation, Employee share options, principal T