Which of the following is an example of an agency problem?

Question

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An agency problem arises when the interests of managers, who act as agents for corporate shareholders or owners, are not aligned with those of the owners. Option A describes an example where the manager's motivation to work diligently may decrease if they do not own the business entirely, creating an agency problem. Option B refers to a standard corporate decision-making process that does not necessarily indicate an agency problem. Option C may align the manager's interests with those of the owners, reducing the likelihood of an agency problem. Option D is an external factor that does not directly relate to the relationship between managers and owners.

Which of the Following Is an Example of an Agency