One method that businesses use to overcome the principal-agent problem is to:
A) not require the board of directors to oversee management.
B) reward executives and managers who make poor decisions.
C) incentivize management.
D) not give employees a stake in the business.

Question

Quizplus · Accepted Answer

Incentivizing management aligns the interests of the managers (agents) with those of the owners or shareholders (principals), thereby helping to overcome the principal-agent problem. This can be done through bonuses, stock options, and other performance-based rewards.

One Method That Businesses Use to Overcome the Principal-Agent Problem