When Considering the Running of a Corporation, There Is a Principal-Agent

question 24

Multiple Choice

When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

• A) shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits.
• B) the CEO is paid in part with stock options.
• C) shareholders cannot observe all of the CEO's decisions.
• D) shareholders sign confidentiality agreements.
• E) shareholders require the firm to pay a dividend.

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Definitions:

Reflexive

Pertaining to or characterized by reflex action; automatic and involuntary response to stimuli.

Primary Circular Reactions

Repetitive actions in very young infants, which serve to build the infant’s own sensory-motor coordination.

Pleasurable Actions

Activities or behaviors that produce feelings of enjoyment or satisfaction.

Classical Conditioning

A learning process in which a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit a similar response.