What Can Be Done to Deal with the Principal-Agent Problem

question 250

Multiple Choice

What can be done to deal with the principal-agent problem?

• A)threaten to liquidate the firm
• B)link top manager salaries to the profits of the firm or the price of the firm's stock
• C)have the CEO be a rotating position
• D)forbid managers from owning any company stock

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Definitions:

Goodwill Impairment

A decrease in the value of the goodwill asset when the fair value of a company's goodwill becomes less than its recorded cost on the balance sheet.

Public Order

Laws, regulations, or practices aimed at preserving peace and preventing behaviors that disrupt society's tranquility and safety.

Economic

Relating to the economy, or the comprehensive system involving the production, distribution, and consumption of goods and services.

Selective Understanding

The phenomenon of interpreting information in a way that aligns with pre-existing beliefs or opinions, ignoring conflicting data.