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Traveling sales representative harold hill only calls on clients four days a week rather than the five days expected by his employer. this is an example of Shirking
The propensity to put in less effort when the reward is lower. If stock is issued instead of debt, owners may be more tempted to avoid paying their obligations because they will have a lesser ownership stake in the company and hence possibly receive a lower return. As a result, shirking is viewed as an agency cost of equity.
The foundation of the shirking model is the observation that complete contracts are infrequent (or nonexistent) in the real world. This suggests that both sides to the contract have a certain amount of discretion, but typically, because of issues with monitoring, the employee's side of the bargain is susceptible to the most discretion. Therefore, paying a wage above what the market would normally bear may offer employees financially advantageous incentives to put in more effort rather than avoid it.
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