When a corporation decides to include its own corporate stock as part of the compensation for its employees, it is trying to solve the
A)adverse selection problem.
B)principal-agent problem.
C)lemons problem.
D)signaling problem.

Question

Quizplus · Accepted Answer

Including corporate stock as part of employee compensation is a way for the corporation to align the interests of its employees with those of the owners/shareholders, and to incentivize employees to work harder to increase the value of the company's stock. This helps to mitigate the principal-agent problem, where the interests of owners and agents (employees) may not be aligned. The other options (adverse selection, lemons problem, signaling problem) are not directly related to this particular situation.

When a Corporation Decides to Include Its Own Corporate Stock