Q33. Which of the following control mechanisms is commonly used to ensure that e
ID: 414266 • Letter: Q
Question
Q33. Which of the following control mechanisms is commonly used to ensure that executives and managers, as agents of the firm's owners, act in the best interests of those owners? a. Pay plan incentives do not align the interests of management and stockholders. b·The establishment of a strong, independent board of directors. C. Stockholders with a large stake in the firm taking a weak role on the board. d. Stockholders read board of director reports. e. People read what is stated in newspapers. O O d Which one nf the fallowing statements accurately describes a key premise of agency theory?Explanation / Answer
33.
Correct Answer:
B.
Explanation:
The concept behind putting the strong and independent directors is that these people are not influenced by the management and take the decisions that are in the best interests of the organization. It acts as a control mechanism and prevents any deviation between the management’s interests and owner’s interests.
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