The Principal-Agent Problem Arises Primarily Because

question 41

Multiple Choice

The principal-agent problem arises primarily because

• A) principals and agents share a common interest, leading to free-rider problems.
• B) principals and agents are in an adversarial role, sharing no common interests.
• C) principals pursue some of their own objectives, which may conflict with the objectives of the agents.
• D) agents pursue some of their own objectives, which may conflict with the objectives of the principals.

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Definitions:

Bounded Ethicality

The concept that cognitive biases and organizational contexts limit individuals’ ability to make ethically ideal decisions.

Ethical Blind Spots

The tendency to overlook or underestimate the ethical dimensions of one’s actions or decisions, often due to cognitive biases.

Ethical

Pertaining to or dealing with morals or the principles of morality; adhering to accepted standards of conduct.

Managers

Individuals in an organization responsible for directing and overseeing the work of a group of people towards the achievement of goals and objectives.