The conflict between the goals of a firm's owners and the goals of its non-owner managers is ________.
A) the agency problem
B) incompatibility
C) serious only when profits decline
D) the window-dressing

Question

Quizplus · Accepted Answer

The conflict between the goals of a firm's owners (shareholders) and the goals of its non-owner managers (agents) is known as the agency problem. The managers may prioritize their own interests over those of the shareholders, which could lead to actions that benefit the managers but harm the firm's performance. This creates a conflict of interest, and it is a significant challenge in corporate governance. The other options (incompatibility, serious only when profits decline, and window-dressing) do not accurately describe this issue.

The Conflict Between the Goals of a Firm's Owners and the Goals