Which of the following actions are likely to reduce the agency problem between stockholders and managers?
A) Congress passes a law that severely restricts hostile takeovers.
B) A manager receives a lower salary but receives additional shares of the company's stock.
C) The board of directors has become more vigilant in its oversight of the company's management.
D) Statements b and c are correct.
E) All of the statements above are correct.

Question

Quizplus · Accepted Answer

Option B reduces the agency problem as it aligns the interests of the manager with those of the stockholders by providing the manager with an incentive to increase the value of the company's stock. Option C also reduces the agency problem as it increases the accountability of the management to the board of directors, which represents the stockholders. Option A, on the other hand, could exacerbate the agency problem by reducing the threat of a hostile takeover, which could have served as a mechanism for disciplining the management. Therefore, options B and C are correct, and option D is the best choice.

Which of the Following Actions Are Likely to Reduce the Agency