The possibility of conflict of interest between the stockholders and management of the firm is called:
A) The shareholders' conundrum.
B) Corporate breakdown.
C) The agency problem.
D) Corporate activism.
E) Legal liability.

Question

Quizplus · Accepted Answer

The agency problem arises when there is a conflict of interest between the desires or goals of the principal (in this case, the stockholders) and the agents who are chosen to represent the principal's interests (in this case, the management). This problem is a central issue in corporate governance.

The Possibility of Conflict of Interest Between the Stockholders and Management