One Reason That the Principal-Agent Problem Is a General One

question 33

Multiple Choice

One reason that the principal-agent problem is a general one in equity contracts is that

• A)most uses of corporate funds are highly visible.
• B)many uses of corporate funds are hidden from view.
• C)since top management usually also owns the bulk of the firm's stock, it has little incentive to respond to the wishes of the remaining shareholders.
• D)the Securities and Exchange Commission does a poor job of detecting fraud by top management.

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Definitions:

Goal Selection

The process of identifying specific, measurable, achievable, relevant, and time-bound objectives that one intends to accomplish.

Feasibility

The practicality or likelihood that something can be accomplished or achieved successfully.

Strategies

Strategies are plans of action or policies designed to achieve a major or overall aim.

Role Improvement

The process of enhancing or upgrading an individual's performance and satisfaction in their specific role.