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Which of the following is not a form of corporate control that can be used to reduce agency problems in MNCs?

a. Stock options
b. Investor monitoring
c. A decentralized management style
d. Hostile takeover threat
e. All of these choices are forms of corporate control that can be used to reduce agency problems in MNCs.

1 Answer

6 votes

Final answer:

c. A decentralized management style

The incorrect form of corporate control to reduce agency problems in MNCs is a decentralized management style. Other methods such as stock options, investor monitoring, and the threat of a hostile takeover are effective in aligning manager-shareholder interests.

Step-by-step explanation:

The form of corporate control that is not used to reduce agency problems in Multinational Corporations (MNCs) is c. A decentralized management style.

Agency problems in MNCs are typically mitigated through mechanisms like stock options, which align the interests of managers with those of shareholders. Investor monitoring also helps reduce agency problems by keeping a check on management actions.

The threat of a hostile takeover can keep managers in line because if they do not perform well, they risk the company being taken over by an entity seeking better management.

When looking at the characteristics of MNCs, they are known for their diversification across national borders and the fact that their business operations and capital collection are international.

MNCs are also associated with concentrating wealth in developed countries, which can sometimes lead to criticisms about their practices in developing nations.

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