Which of the following is true?
A)A free rider contributes to teamwork but does not receive pay
B)Mitigating the agency problem requires alignment of the interests of principal and agent
C)The horizon problem describes agents who focus on the long-term
D)Agency costs are an advertising expense
E)None of the choices are correct

Question

Quizplus · Accepted Answer

Mitigating the agency problem requires alignment of the interests of principal and agent. This is because the agency problem arises when there is a conflict of interest between the principal (owner/shareholder) and the agent (manager/employee) who acts on behalf of the principal. To mitigate this problem, their interests need to be aligned through various mechanisms such as performance-based incentives, stock options, and regular monitoring and evaluation of the agent's performance. Therefore, option B is the correct choice.

Which of the Following Is True