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 possibility of conflict of interest between the stockholders and management of the firm is called the agency problem. This is because of the potential for the management to act in their own interests rather than in the best interests of the shareholders, who have entrusted them with the responsibility of managing the company. This conflict arises due to the separation of ownership and control in the modern corporation.

The Possibility of Conﬂict of Interest Between the Stockholders and Management