What are three major ways that corporations can cope with the principal-agent problem?
What will be an ideal response?
First, employees can be made part-owners of the corporation. Second, employees can be given incentive pay linked to achieving targets that serve the interests of the owners. Third, managers can be given long-term contracts that encourage them to pursue long-term strategies that can yield higher profit over time.
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Suppose the government has declared beer to be an illegal substance and imposes a fine on anyone caught buying a beer. Selling beer, however, remains legal
Using the above figure, in which CBL is the cost of breaking the law, what is the equilibrium price and quantity with this new law in effect? A) $5 per quart and 300 quarts of beer B) $3 per quart and 500 quarts of beer C) $3 per quart and 100 quarts of beer D) $1 per quart and 300 quarts of beer
Social Security benefits are funded by
A. special taxes on corporate profits. B. property taxes and user taxes. C. a payroll tax with equal contributions from employer and employees and by self-employment taxes. D. a special tax on corporate profits and approximately 10 percent of general sales taxes.
Refer to Figure 19.2. With no budget constraint, a rational consumer will consume
A. 1 apple. B. 0 apples. C. 6 apples. D. an infinite number of apples.
The international unit of accounting used by the International Monetary Fund (IMF) is called
A. special drawing rights. B. the IMF dollar. C. the quota subscription. D. the Eurodollar.