Agency theory regards conflicts of interest as:
A) something to be eliminated before a contract can be finalised
B) the natural state of affairs
C) something bad
D) a method for solving problems.

Question

Quizplus · Accepted Answer

According to agency theory, conflicts of interest between the principal (owner) and agent (employee) are considered a natural state of affairs. This is because agents may have different goals and motivations from the principal, and may act in their own self-interest rather than in the best interest of the principal. Agency theory focuses on designing incentives and mechanisms to align the interests of the principal and agent to reduce these conflicts.

Agency Theory Regards Conflicts of Interest As