Question

What is the true statement about agency conflicts within a corporation?

A) Agency conflicts only arise between employees and management.
B) Agency conflicts refer to harmonious relationships within a corporation.
C) Agency conflicts occur when the interests of shareholders and management diverge.
D) Agency conflicts are unrelated to corporate governance.

Answer 1

Agency conflicts within a corporation occur when the interests of shareholders and management diverge.

Step-by-step explanation:

Agency conflicts within a corporation occur when the interests of shareholders and management diverge.

For example, if management decides to pursue a risky investment that could potentially harm the financial interests of shareholders, an agency conflict arises.

This conflict is due to the separation of ownership (shareholders) and control (management) in a corporation, creating potential conflicts of interest between the two group