Decentralization Worsens the Problem of Divergence Between Individual and Organizational

question 26

True/False

Decentralization worsens the problem of divergence between individual and organizational goals by preventing lower-level managers from preparing to move to upper-level positions.

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Definitions:

Top Managers

Senior executives responsible for making strategic decisions and overseeing the overall operations of an organization.

Asymmetric Information

A situation in which one party in a transaction has more or significantly better information than the other, leading to an imbalance in the transaction.

Moral-Hazard

A situation where one party is more likely to take risks because the consequences of those risks will be felt by another party.

Principal-Agent Problem

A dilemma arising from a conflict of interest between a principal (someone who entrusts a task) and an agent (the one performing the task), where the agent may not act in the best interest of the principal.