The possibility that management of the corporation may not be pursuing the same goals as the same goals as those of stockholders

Question

grandymaker [24]

3 years ago

5

The possibility that management of the corporation may not be pursuing the same goals as the same goals as those of stockholders

under the__________.

Business

1 answer:

Nana76 [90] · Answer 1 · 2022-05-12T04:29:50+03:00

Answer:

PRINCIPAL-AGENT PROBLEM

Explanation:

The possibility that management of the corporation may not be pursuing the same goals as those of stockholders is what is referred to as 'the agency problem'. This agency problem refers to the potential conflict of interest embedded in any corporate relationship where the party managing the company is different from the owners.

The shareholders for example might out a very risky loan for the business in order to get performance bonuses but that might not be in the best interest of the stockholders.