Which of the following statements about agency theory is True?
A) Agency theory focuses on the characteristics of incentive plans that motivate people
B) Agency theory focuses on the contracting behavior between principal and agent
C) Agency theory works with the assumption that easy goals will motivate employees to perform at the highest level
D) Agency theory seeks to understand the types of performance measures and rewards that motivate employees

Question

Quizplus · Accepted Answer

Agency theory primarily examines the relationship and contractual arrangements between principals (such as shareholders) and agents (such as company executives), focusing on how to align the interests of agents with those of principals to mitigate agency problems.

Which of the Following Statements About Agency Theory Is True