Describe the principal-agent relationship. In your answer, give an example of how a principal-agent problem arises in the corporate world. Can such a problem become costly? Explain
What will be an ideal response?
Answer: The principal-agent relationship is a relationship between one party (principal) who hires another party (agent) to perform a task. Problems with a principal-agent relationship arise when the agent has interests that conflict with those of the principal. Any problem becomes costly when the principal cannot always know for sure if an agent is behaving in a trustworthy manner. If a principal fears the agent is not properly fulfilling the assigned duties, then the principal has to decide what costs should be undertaken to monitor the agent. Costs might include hiring another party to watch the agent or offering the agent pay based on certain performance criteria. A common performance cost for large companies is the giving of stock options to employees so that their wealth is tied to how well they do their job.
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In which of the following periods was output growth the fastest in the U.S. economy?
A. Long boom period B. Economic liftoff period C. Great Depression period D. Reorganization period
Viking Corporation is owned equally by Sven and his wife, Olga, each of whom hold 100 shares in the company. Viking redeemed 75 shares of Sven's stock for $2,000 per share on December 31, 20X3. Viking has total E&P of $500,000. What are the tax consequences to Viking because of the stock redemption?
A. No reduction in E&P because of the exchange. B. A reduction of $150,000 in E&P because of the exchange. C. A reduction of $375,000 in E&P because of the exchange. D. A reduction of $187,500 in E&P because of the exchange.
Which of the following is not a key consideration in evaluating a recruitment and selection process:
a. cost b. effectiveness c. speed d. fairness
A basic assumption of short-interval scheduling is that short-range goals are more likely to be attained than are long-range goals
Indicate whether the statement is true or false.