It is more cost-efficient for owners to bear risk than managers, because managers demand a premium (extra compensation)for bearing risk.

Question

Quizplus · Accepted Answer

Managers typically receive a salary or bonus for their work, and if they also bear risk on behalf of the company, they may demand additional compensation for that added responsibility. Owners, on the other hand, are already invested in the company and have a vested interest in managing risk to protect their investment, so there is no need for them to demand a premium for bearing risk. Therefore, it is more cost-efficient for owners to bear risk than to pay managers to do so.

It Is More Cost-Efficient for Owners to Bear Risk Than