What is Incomplete Contract

The purpose of the present study was to find the answer to the following questions: How the growing digitalization will affect agency relations, an important element of corporate governance, and what preventive measures should be taken in this situation? Therefore, the impact of digitalization on opportunistic behavior and agency costs was reviewed. The analysis revealed that digitalization provokes reduction of information asymmetry, leads to a decrease in the initiative of top managers, thereby changing the preconditions of opportunistic behavior. On the basis of the ordinal approach, an original toolkit was developed, which made it possible to model the identified dependencies, transformation of the agents' utility in case the principals' demands altering, and to demonstrate ways to reduce agency costs by proper selection of candidates for top manager positions. In conclusion, by means of the developed toolkit, the methodological recommendations were suggested for selecting the agents during the process of recruitment, taking into account the impact of digitalization.