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Asked by Nancy Lainez on Apr 29, 2024

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As it relates to corporations, the principal-agent problem is that

A) the goals of the corporate managers (the principals) may not match the goals of the corporate owners (the agents) .
B) the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals) .
C) the federal government (the agent) taxes both corporate profits and the dividends paid to stockholders (the principals) .
D) it is costly for the corporate owners (the principals) to obtain a corporate charter from government (the agent) .

Principal-Agent Problem

A scenario in which there is a conflict of interest between a party that delegates work (principal) and the party that performs the work (agent).

Corporations

Legal entities that are separate from their owners, with the ability to own assets, incur liabilities, and engage in contracts or legal actions.

Corporate Managers

Individuals in charge of managing a corporation's affairs, making strategic decisions, and ensuring operational efficiency.

  • Recognize the principal-agent problem in corporations and its implications for corporate governance.
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ZK
Zybrea KnightMay 05, 2024
Final Answer :
B
Explanation :
The principal-agent problem arises when the goals of the principals (the corporate owners) do not align with the goals of the agents (the corporate managers). This misalignment can lead to issues in corporate governance and decision-making.

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