Question

You are the ceo of a company and you are considering entering into an agreement to have your company buy another company. you think the price might be too​ high, but you will be the ceo of the​ combined, much larger company. you know that when the company gets​ bigger, your pay and prestige will increase. what is the nature of the agency conflict here and how is it related to ethical​ considerations

Answer 1

There is an ethical dilemma when the CEO of a firm has the opposite incentives to those of the shareholders. In this case, you (as the CEO) have an incentive to potentially overpay for another company (which would be damaging to your shareholders) because your pay and prestige will improve.