Which of the following statements is correct? a. Given the multi-owner nature of most large corporations, agency costs associated with perquisiteconsumption are not really a problem. b. Managers may operate in the stockholders' best interests, but they may also operate in their ownpersonal best interests. As long as managers stay within the law, there simply are not any effectivecontrols that stockholders can implement to control managerial decision making. c. Shareholder agency costs include the opportunity costs associated with constraining managerialfreedom but do not include managerial salaries. d. An agency relationship exists when one or more persons hire another person to perform some servicebut withhold decision-making authority from that person. e. All of the above statements are false.

Question

Business

Jadyn Parsons

3 July, 01:14

Which of the following statements is correct? a. Given the multi-owner nature of most large corporations, agency costs associated with perquisiteconsumption are not really a problem. b. Managers may operate in the stockholders' best interests, but they may also operate in their ownpersonal best interests. As long as managers stay within the law, there simply are not any effectivecontrols that stockholders can implement to control managerial decision making. c. Shareholder agency costs include the opportunity costs associated with constraining managerialfreedom but do not include managerial salaries. d. An agency relationship exists when one or more persons hire another person to perform some servicebut withhold decision-making authority from that person. e. All of the above statements are false.

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Answers (1)

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Danica Hood · Answer 1

c. Shareholder agency costs include the opportunity costs associated with constraining managerialfreedom but do not include managerial salaries.

Explanation:

"Agency costs usually refers to the conflicts between shareholders and their company's managers. A shareholder wants the manager to make decisions which will increase the share value. Managers, instead, would prefer to expand the business and increase their salaries, which may not necesarrily increase share value."

Reference: InvestingAnswers. "Agency Costs." InvestingAnswers, 2019