Question

One of the ways to reduce agency conflict is by

A. Designing an effective compensation package
B. Having managers report to the board of directors
C. Hiring outside monitors to keep track of the managers decision
D. Instituting severe penalties for bad decisions.

Answer 1

The answer is: [A]: Designing an effective compensation package .
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Note: A well-designed compensation package is one of the most effective methods connecting the interests of managers with those of stockholders.
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