How do principal-agent problems cascade down the hierarchy in an organization? Describe an example of principal-agent problems. The example can be from your reading in this class, your reading outside of class, or your own experience.
What will be an ideal response?
Student examples will vary. A sample answer follows.
Senior executives, such as the CEO, face agency problems when they delegate authority of strategic business units to general managers. Employees who perform the actual operational labor are agents who work on behalf of the managers. Such front-line employees often enjoy an informational advantage over management. They may tell their supervisor that it took longer to complete a project or serve a customer than it actually did, for example. Some employees may be tempted to use such informational advantage for their own self-interest.
An example of the principal-agent problem allegedly happened when Anthony Levandowski set up his own autonomous-vehicle company, Otto, while working at Waymo.
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In recessions, the short-term expected real interest rate usually
A. rises by about 4 percentage points. B. rises by about 2 percentage points. C. declines by about 2 percentage points. D. declines by about 4 percentage points.
Colfax Corporation had a Retained Earnings balance on January 1, 2009, of $720,000; declared cash dividends during 2009 in the amount of $112,000, of which $30,000 were not paid until 2010; and reported an ending balance of Retained Earnings of $1,020,000 . Based on these facts alone, net income for 2009 for Colfax Corporation must have been
a. $152,000. b. $312,000. c. $382,000. d. $412,000.
The average tardiness for the jobs listed in the following table under the FCFS (first come, first served) rule is ______.
A. 11 days
B. 9.8 days
C. 15 days
D. 8 days
Which of the following inventory costing methods yields the highest cost of goods sold during a period of rising inventory costs?
A) specific identification B) weighted-average C) last-in, first-out D) first-in, first-out