Agency problems appear in many settings within a firm.All of the following are examples,except which is NOT a good example of this problem?
A) Diversified stockholders are more enthusiastic on accepting business risks than are firm managers.
B) Firm managers receive cash bonuses based on the performance of the firm.
C) Employees sometime take items from the store in which they work.
D) Lenders to firms want the managers to invest in safe projects to protect their collateral in the project but managers want to invest in projects that will make a name for them and warrant promotion.
E) Firm managers sometime want to relax on the job.

Question

Quizplus · Accepted Answer

B) is not a good example of an agency problem because cash bonuses tied to firm performance are designed to align the interests of managers with those of the shareholders, reducing the agency problem.

Agency Problems Appear in Many Settings Within a Firm