The "agency problem" refers to:
A)The inability the owners of a company to control the managers they appoint to run the company
B)The misalignment of goals between the shareholders and managers of a company
C)The misalignment of goals between a principal and his/her agent
D)The tendency for the CEOs of public corporations to receive excessive compensation

Question

Quizplus · Accepted Answer

The agency problem refers to the misalignment of goals between a principal (such as a shareholder) and his/her agent (such as a manager) who is acting on the principal's behalf. The agent may pursue their own self-interest rather than the interests of the principal. This can be seen in situations where managers prioritize their own career advancement or personal gain over maximizing shareholder value.

The "Agency Problem" Refers To