Which One of the Following Actions Is the Best Example

question 235

Multiple Choice

Which one of the following actions is the best example of an agency problem?

• A) Paying management bonuses based on the number of store locations opened during the year.
• B) Paying management bonuses based on the current market value of the firm's stock.
• C) Accepting a project that enhances both management salaries and the market value of the firm's stock.
• D) Requiring stockholders approval of all management compensation decisions.
• E) Basing management bonuses on the attainment of specific financial goals.

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Definitions:

Duty To Serve

An obligation, often seen in utilities and public services, requiring companies to offer services to all customers within a given area, despite the possible financial loss involved.

Limited Liability Partnerships

Limited Liability Partnerships (LLPs) are partnerships in which some or all partners have limited liabilities, meaning they are not personally responsible for the partnership's debts.

Contractual Obligation

An agreement that legally binds two or more parties to specific actions or non-actions.

Commission Of A Tort

The act of committing a wrong that is recognized by law as grounds for a lawsuit, typically involving injury to individuals or entities.