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Which one of the following situations is most apt to create an agency conflict?A) Compensating a manager based on his or her division's net incomeB) Giving all employees a bonus if a certain level of efficiency is maintainedC) Hiring an independent consultant to study the operating efficiency of the firmD) Basing management bonuses on the length of employmentE) Laying off employees during a slack period

Respuesta :

Answer:

The correct answer is letter "D": Basing management bonuses on the length of employment.

Explanation:

Agency conflict occurs when a problem of interest arises for an agent. The agent is the character acting on behalf of another person. A conflict of interest arises when the agent's interests are different from those of the principal (the people to whom the agent represents. In the corporate world, for instance, a CEO (Chief Executive Officer) is the agent for the company's owners: the shareholders.

In that sense, if in a given company the management bonuses are set based on the length of employment instead of on the production rate (more objective), that would cause an agency conflict, making the letter "D" be the best choice.

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