How might you attempt to solve that agency problem

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Reference no: EM13920868

1. Do you agree with the following statement? Explain.

2. You are the owner and CEO of a large divisionalized firm, with operations in a number of diverse industries. Reporting to you are a number of division managers. Division managers have considerable decision-making responsibility with respect to the day-to-day operations of their divisions, but you must approve any capital investments above $100,000 before they are made.

a. As owner, what type of capital investments would you like your division managers to be proposing to you?

b. Is there a potential agency problem between you, as owner, and your division managers with respect to capital investments? What is the nature of that problem? Why is it a problem?

c. How might you attempt to solve that agency problem?

d. Do you think you can solve the problem entirely? Why or why not?

Reference no: EM13920868

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