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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Net operating profit after taxes (NOPAT) represents a firm's earnings after deducting both interest and taxes
Indicate whether the statement is true or false
Which of the following statements is true of gender diversity in workplaces?
A) No consistent male-female differences exist in problem-solving ability, analytical skills, competitive drive, motivation, sociability, or learning ability. B) Today, men make up nearly two-thirds of the workforce, while women account for the remaining third. C) Affirmative action policies have resulted in women, generally, starting their careers at higher levels than men. D) Despite the disparity in representation in the workforce, women earn nearly as much as men do on a median basis.