To avoid the agency problem, managers should take actions:
A) Which adds value to the firm.
B) Only after the president has approved them.
C) Only if they increase the market share of the firm.
D) Which add to the size of the firm's workforce.
E) Only if management jobs will not be jeopardized.

Question

Quizplus · Accepted Answer

The agency problem arises when the interests of managers diverge from those of the shareholders. Managers should take actions that add value to the firm, aligning their decisions with the interests of the shareholders and thus mitigating the agency problem.

To Avoid the Agency Problem, Managers Should Take Actions