What Is the Most Common Way That Principal-Agent Problems Are

question 84

Multiple Choice

What is the most common way that principal-agent problems are addressed in most corporations?

• A)by minimizing the number of decisions that a manager makes where there is a conflict between the managers interests and those of the shareholders
• B)by terminating the employment of employees who are found to have put their own interests above those of the company
• C)by using disinterested outside bodies to adjudicate between managers and shareholders when such conflicts arise
• D)by prosecuting managers who have been found to have illegally used company moneys for their own benefit
• E)by paying the managers high salaries to encourage them to act in the company's interests.

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Definitions:

Several Houses

A phrase referring to more than one residential dwelling.

Framing Effects

The phenomenon where people's decisions and preferences can be significantly influenced by the way information, choices, or situations are presented.

Poor Affective Forecasting

The tendency of individuals to mispredict their future feelings in response to events or outcomes.

Many Options

The availability of a wide range of choices or alternatives.