27 Oct Under the basic theory determining agency costs, the principal always bears the entire amount of the cost since he or she is the one receiving lesser benefit from the agent.
Flag question: Question 1
Under the basic theory determining agency costs, the principal always bears the entire amount of the cost since he or she is the one receiving lesser benefit from the agent.
Group of answer choices
True
False
Flag question: Question 2
The Ultra Vires doctrine applies only to criminal activities performed by a corporation.
Group of answer choices
True
False
Flag question: Question 3
In order to vote, a shareholder must be present at the shareholder meeting.
Group of answer choices
True
False
Flag question: Question 4
In order to be a member of a corporation’s board of directors, a person must own stock in that corporation.
Group of answer choices
True
False
Flag question: Question 5
Assume these numbers:
Agent is paid $50k per year. Agent sometimes slacks off and surfs the internet. This slacking by the agent costs the principal $90k in revenue and this is the starting agency cost amount (that is, if the agent didn’t slack off, she would generate an additional $90k in revenue for the principal – this number is separate from agent’s salary). Assume without any monitoring or bonding mechanisms, this number would remain constant.
Principal installs a computer program which allows the principal to view what the agent does on her work computer. The program costs $20k per year to use.
Since she knows the principal is watching, the agent no longer surfs the internet. She instead reads the paper at times, but overall she slacks off less (although she still slacks off some). On account of working more, agent brings in an additional $70k in revenue.
In this hypothetical, how much (if any) did Principal reduce the original $90k agency cost?
Group of answer choices
A. $90k
B. $70k
C. $60k
D. $50k
E. None of the above
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