Stockholders have little incentive to monitor

Question

Quizplus · Accepted Answer

Stockholders own a portion of the company and have an interest in seeing the company succeed, but they may not have the time, resources, or knowledge to actively monitor the decisions and actions of the managers who run the company on a day-to-day basis. This can lead to a principal-agent problem, where the managers may act in their own self-interest rather than in the best interest of the company and its shareholders. Therefore, it is important for corporate governance mechanisms to be in place to hold managers accountable and align their interests with those of the shareholders.

Stockholders Have Little Incentive to Monitor