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Do not post on website: The principal-agent problem occurs if the manager (CEO) is not present to monitor the worker (manager). How can she get the worker (manager) to do what is in her best interest?...

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Do not post on website: The principal-agent problem occurs if the manager (CEO) is not present to monitor the worker (manager). How can she get the worker (manager) to do what is in her best interest?

What would you recommend to mitigate the principal-agent problem? Explain.

The answer only needs to be two or three concise paragraphs.

Answered Same Day Dec 21, 2021

Solution

David answered on Dec 21 2021
120 Votes
The principal-agent problem occurs if the manager (CEO) is not present to monitor
the worker (manager). How can she get the worker (manager) to do what is in her
est interest? What would you recommend to mitigate the principal-agent problem?
Explain.
Answer:
Principle-agent problem is basically a moral hazard problem and it arises when
there is conflict in the interests of two parties. The objective of the principle i.e. the
owner /stockholde
CEO of the company is to maximize the company’ total profit
(or total market value) and...
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