Which of the following are mechanisms that have evolved to mitigate potential agency problems?
I.Compensation in the form of the firm's stock options
II.Hiring bickering family members as corporate spies
III.Underperforming management teams being forced out by boards of directors
IV.Security analysts monitoring the firm closely
V.Takeover threats
A)II and V
B)I, III, and IV
C)I, III, IV, and V
D)III, IV, and V
E)I,III,and V

Question

Quizplus · Accepted Answer

Compensation in the form of stock options aligns the interests of managers with shareholders as their compensation is linked to the performance of the company's stock. Underperforming management teams being forced out by boards of directors, security analysts monitoring the firm closely, and takeover threats also help mitigate agency problems by ensuring that management is held accountable and that there are consequences for underperformance or unethical behavior. Hiring family members as corporate spies is not a mechanism to mitigate agency problems and may actually lead to more problems.

Which of the Following Are Mechanisms That Have Evolved to Mitigate