Potential conflicts of interest between managers and owners can be overcome if compensation packages are tied to improvement in firm value.

Question

Quizplus · Accepted Answer

By tying the compensation packages of managers to the improvement of the firm's value, their interests will align with those of the owners, as both parties will benefit from the firm's success. This can mitigate potential conflicts of interest and motivate managers to work towards the long-term success of the business.

Potential Conflicts of Interest Between Managers and Owners Can Be