The OECD Principles of Corporate Governance link manages' remuneration to shareholder interest to address which agency problem?

Question

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The OECD Principles of Corporate Governance recommend linking managers' remuneration to shareholder interest to address various agency problems, including risk aversion (managers avoiding risky projects that could benefit shareholders), dividend retention (managers preferring to retain earnings rather than distributing them as dividends), and the horizon problem (managers focusing on short-term gains rather than the long-term health of the company). These measures aim to align the interests of managers with those of shareholders, mitigating conflicts that arise from differing objectives.

The OECD Principles of Corporate Governance Link Manages' Remuneration to Shareholder