Which of the Following Statements Is True of Agency Problems

question 35

Multiple Choice

Which of the following statements is true of agency problems?

• A) Regardless of economic conditions, if a firm's stock price falls during the year, this indicates that the firm's managers must not be acting in the best interests of the shareholders.
• B) One method of controlling agency problems is to engage in the taking of "poison pills."
• C) One of the best means to control agency problems is to require the managers and other important decision makers of the firm to also be owners of the firm.
• D) Agency problems probably would not exist if the important decisions of a firm were made by persons who have no vested interests, such as ownership, in the firm.
• E) Shareholders solve the agency problems by hostile takeover of the firm from the managers.

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Definitions:

Douglas McGregor

An American social psychologist who proposed Theory X and Theory Y, contrasting models of workforce motivation and management.

Theory Y

A management concept that assumes employees are inherently motivated and enjoy their work, requiring less supervision and more collaboration and trust.

Frank Gilbreth

An American engineer, consultant, and author, best known for his work in time and motion study alongside his wife Lillian Gilbreth.

Lillian Gilbreth

Lillian Gilbreth was a pioneering engineer and psychologist known for her contributions to industrial management and ergonomics, often working alongside her husband, Frank Gilbreth.