In corporate governance, the agency problem mainly arises because:
Correct answer: B. Managers may pursue personal interests instead of owners' interests
- A. Customers and suppliers have different accounting systems
- B. Managers may pursue personal interests instead of owners' interests
- C. Employees and managers always receive different salaries
- D. Governments regulate companies through separate departments
Explanation
The agency problem results from separating ownership from control. Managers may make decisions that benefit themselves rather than the shareholders they represent.
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About Business Ethics and Corporate Governance
Business ethics applies principles such as honesty, fairness, responsibility and transparency to decisions involving employees, customers, investors, competitors and society. Corporate governance covers the board of directors, accountability, disclosure, internal controls, stakeholder interests, agency conflicts, corporate social responsibility, codes of conduct and whistleblowing.
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