chapter 4 question 1 2 - Question 1 The agency problem is a...

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Question 1 “The agency problem is a problem that arises because of the separation of the ownership and control of a business. It occurs when the firm’s owner delegates authority to managers.” Firm owners have to ensure their managers are reliable and trustworthy. When operating a business you always want to have a good figure headed manager. Firm owner’s also need to ensure their managers have had prior on the job training working as a manager. Managers have to be able to delegate work to their co-workers and not always have to carry the slack for the worker that doesn’t want to pull their share of the work. Co-workers have to be dependable, able to work and know how to take responsibility for their actions. “Stock options give managers the right to buy stock at a certain price and to benefit from increases in the future by selling it. Separation of ownership and control results in an agency problem.” In order for the stock option program to work to lessen the agency problem, “requires aligning interests of managers
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This note was uploaded on 10/21/2011 for the course INTRO TO B BBA 2010 taught by Professor Profjones during the Spring '11 term at Columbia Southern University, Orange Beach.

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chapter 4 question 1 2 - Question 1 The agency problem is a...

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