The _____ theory argues that executives make decisions that maximize their rewards.

Question

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The agency theory argues that executives, who act as agents for shareholders, make decisions that maximize their own rewards (such as bonuses, stock options) rather than the interests of the shareholders they are supposed to represent. Economic valuation theory focuses on maximizing shareholder value, social comparison theory looks at how individuals evaluate themselves relative to others, and tournament theory explains executive behavior in the context of competition for promotions and higher status. None of these theories specifically address executive decision-making with regards to personal rewards.

The _____ Theory Argues That Executives Make Decisions That Maximize