Question

Which of the following would be best considered to be an agency conflict problem in the behavior of the following financial​ managers? A. Bill chooses to pursue a risky investment for the​ company's funds because his compensation will substantially rise if it succeeds. B. Michael chooses to enhance his​ firm's reputation at some cost to its shareholders by sponsoring a team of athletes for the Olympics. C. Sue instructs her staff to skip safety inspections in one of the​ company's factories, knowing that it will likely fail the inspection and incur significant costs to fix. D. James ignores an opportunity for his company to invest in a new drug to fight​ Alzheimer's disease, judging the​ drug's chances of succeeding as low.

Answer 1

A. Bill chooses to pursue a risky investment for the​ company's funds because his compensation will substantially rise if it succeeds.

Step-by-step explanation:

An agency conflict problem usually arises when the agent (managers) do not act in the best interest of his principals (e.g. shareholders) usually because of selfish interests of the agent (manager).

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