The primary reason for the divergence between the shareholder wealth maximization goal and the actual goals pursued by management has been attributed to _____.
A) separation of social responsibility and stakeholders' concerns
B) separation of ownership and control
C) separation of personal welfare and long-run profit goals
D) the granting of "golden parachute" contracts

Question

Quizplus · Accepted Answer

The separation of ownership and control in modern corporations creates a situation where managers may pursue their own goals and interests, even if they conflict with the goal of maximizing shareholder wealth. Managers may prioritize their own job security or personal monetary incentives over the long-term profitability and success of the company. This divergence can be seen in decisions such as mergers and acquisitions that may benefit management but not necessarily the shareholders.

The Primary Reason for the Divergence Between the Shareholder Wealth