Making a manager a residual claimant is often a way of
A)forming a partnership.
B)increasing the efficiency of a nonprofit firm.
C)reducing the incentive of the manager to shirk.
D)redirecting the firm to the objective of revenue maximization.

Question

Quizplus · Accepted Answer

Making a manager a residual claimant (meaning they have a claim on the residual profits of the firm after all other obligations have been met) aligns their financial interests with the firm's performance, thereby reducing their incentive to shirk or underperform, as their compensation is directly tied to the firm's success.

Making a Manager a Residual Claimant Is Often a Way