Which one of the following alternatives is commonly used to reduce agency problems as they relate to corporate control?
A) stock options
B) higher salaries
C) larger perquisites ("perks")
D) less restrictive accountability requirements

Question

Quizplus · Accepted Answer

Stock options align the incentives of managers with those of shareholders by providing managers with the opportunity to share in the financial success of the firm. This can reduce the likelihood of agency problems and improve corporate control. Higher salaries and larger perks may actually exacerbate agency problems by providing managers with more personal benefits at the expense of shareholder value. Less restrictive accountability requirements may lead to reduced monitoring and oversight, which can also increase the risk of agency problems.

Which One of the Following Alternatives Is Commonly Used to Reduce