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QUESTION 3
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
articles of incorporation
corporate breakdown
agency problem
bylaws
legal liability

Ask by Vargas Marshall. in the United States
Mar 24,2025

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The correct term for the conflict between shareholders and corporate managers is the agency problem.

Solución

  1. The term refers to the conflict of interest between the shareholders (principals) and the corporate managers (agents).
  2. The other options are defined as:
    • : Legal documents that establish a corporation.
    • : Not a standard term for this scenario.
    • : Rules governing the internal management of a corporation.
    • : The legal responsibility for one’s actions.
  3. Based on these definitions, the conflict described is associated with the agency problem.
Thus, the correct answer is:
.

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Mind Expander

The term you’re looking for is “agency problem.” This situation arises when the goals of the corporate managers diverge from the interests of the shareholders, leading to a conflict. Managers may prioritize their own benefits, such as bonuses or job security, over maximizing shareholder value, which can create tension and inefficiencies within the company.
Understanding and addressing the agency problem is crucial for corporate governance! Companies often implement mechanisms like performance-based compensation, regular audits, and shareholder meetings to align the interests of managers and shareholders. This way, everyone is on the same team, working towards the collective success of the organization!

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