One way to correct a potential principal-agent problem is for stockholders to
A) offer managers "golden parachutes" in the event of a takeover.
B) empower managers to make the decisions they feel are best.
C) ensure that there is no explicit linkage between managers' compensation and the profitability of the firm.
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

Offering managers "golden parachutes" in the event of a takeover can align their interests with those of the shareholders, as it provides a financial incentive for managers to act in the shareholders' best interest, potentially making the company more attractive for a takeover and thus increasing shareholder value.

One Way to Correct a Potential Principal-Agent Problem Is for Stockholders