The agency problem is a driving force behind the growing importance attached to sound corporate governance.
In this context, the ‘agents’ are the:
A Customers
B Shareholders
C Managers
D Auditors
22. Which of the following is a problem associated with managerial reward schemes?
A By rewarding performance, an effective scheme creates an organisation focused on continuous improvement
B Schemes based on shares can motivate employees/managers to act in the long-term interests of the company
C Self-interested performance may be encouraged at the expense of team work
D Effective schemes attract and keep the employees valuable to an organisation
23. Which of the following are typical criticisms of executive share option schemes (ESOPs)?
1. When directors exercise their options, they tend to sell the shares almost immediately to cash in on their profits.
2. If the share price falls when options have been awarded, and the options have no value, they cannot act as an incentive.
3. Directors may distort reported profits to protect the share price and the value of their share options.
A 1 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3