Asked by Esdras Lopez on Sep 24, 2024
Verified
A potential problem arises in principal-agent relationships
A) because the agents and the principals have identical goals
B) because the principals may want to minimize his profits,while the agent may want to maximize them
C) because the agents may have different goals from the principals
D) the goals of principals and agents are irrelevant
Principal-agent Relationships
A scenario where one party (the principal) delegates work to another party (the agent), who performs that work on behalf of the principal.
Minimize Profits
The strategy of reducing profits to a minimum, possibly for tax advantages, ethical reasons, or for future strategic positioning.
Maximize Them
The process of making the most or best of certain resources, outcomes, or situations to achieve the highest possible benefit or efficiency.
- Become aware of the discrepancies between the aspirations of principals and agents in their association.
Verified Answer
JA
JYOTHI ANUSHAabout 19 hours ago
Final Answer :
C
Explanation :
Principal-agent relationships are characterized by a situation where one party, the principal, hires another party, the agent, to act on their behalf. However, the agent may have different goals and objectives from the principal, leading to a potential conflict of interests. This misalignment of goals can lead to the agent acting in their own self-interest rather than in the interest of the principal, which can be detrimental to the principal's goals or objectives. Therefore, it is essential to align the goals of the agents with those of the principals to ensure that the relationship is fruitful and mutually beneficial.
Learning Objectives
- Become aware of the discrepancies between the aspirations of principals and agents in their association.