Which of the Following Would Be Best Considered to Be

question 33

Multiple Choice

Which of the following would be best considered to be a principal-agent problem in the behaviour of the following financial managers?

• A)Bill chooses to pursue a risky investment for the company's funds,because his compensation will substantially rise if it succeeds.
• B)Sue instructs her staff to skip safety inspections in one of the company's factories,knowing that it will likely fail the inspection and incur significant costs to fix.
• C)James ignores an opportunity for his company to invest in a new drug to fight Alzheimer's disease,judging the drug's chances of succeeding as low.
• D)Michael chooses to enhance his firm's reputation at some cost to its shareholders by sponsoring a team of athletes for the Special Olympics.
• E)Tara treats her staff to a free lunch at the company's expense to increase morale.

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Definitions:

Advertisers

Organizations or individuals that pay to display advertisements in order to promote goods, services, or ideas to potential customers.

Ethical Issue

A situation or problem requiring individuals or organizations to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical).

Actions Taken

The measures or steps implemented in response to a situation or problem.

Responsibility

A tenet of ethics in which you accept the consequences of your decisions and actions.