The key aspect of the agency relationship for the corporate form of business is that:

Question

BlackTom AI · Accepted Answer

The question asks about the key aspect of the agency relationship for the corporate form of business. Here are the options analyzed one by one to compare how well they capture the underlying dynamic.
Option a: 'the firm’s owners will always act in the best interests of the managers.' This is generally inaccurate in corporate settings because owners (shareholders) and managers often have different goals, and there isn’t an automatic alignment where owners always superiority-act in managers’ interests. It misstates the typical flow of incentives.
Option b: 'the managers will always act in the best interests of the firm’s owners.' While that would be ideal, in practice managers pursue their own interests or agendas unless proper governance mechanisms align them with shareholders. The word 'always' makes this claim too strong and overlooks conflicts of interest and agency problems.
Option c: 'with their management contracts, the managers have the incentive to act in the best interests of the shareholders.' This statement suggests that contracts alone ensure alignment. In reality, contracts are important but not foolproof; incentives can still be misaligned, and contracts may not perfectly capture shareholder value or adapt to changing circumstances. Also, the phrase 'management contracts' is not the standard description of the agency relationship in the corporate form.
Option d: 'the managers have different incentives from the shareholders.' This option highlights the central agency issue: managers and shareholders may pursue different objectives due to separate ownership and control, leading to potential conflicts of interest. Recognizing this misalignment is the key aspect of the agency relationship in corporate structures, which is why governance mechanisms (like boards, incentives, monitoring) are employed to bridge the gap.
In summary, the crux of agency theory in corporations is the potential divergence between owners’ interests and managers’ incentives, not absolute alignment or guaranteed outcomes. Each incorrect option either overstates alignment, ignores the possibility of misalignment, or assumes contractual guarantees that may not hold in all cases. The chosen understanding emphasizes the fundamental separation of ownership and control and the resulting incentive differences that governance seeks to manage.

The key aspect of the agency relationship for the corporate form of business is that:

查看解析

登录即可查看完整答案

类似问题

Principal-Agent Dilemma is the basis for corporate governance, and results from the separation of control between:

According to agency theory, monitoring would be cheaper and more effective if Blank ______.

In agency theory, a business's principal is typically a(n) Blank ______.

Which of the following focuses on how employee compensation can be used to align the divergent interests and goals of an organizations' various stakeholders?

Select all the correct alternatives regarding the Principal-Agent problem in corporations:

The relationship between stockholders and management can best be described as a(n) Blank ______ relationship.

Which of the following is not part of the agency relationship?

The action that is likely to be the least effective in aligning shareholder and managers interests is:

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单