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f Finance $-$ Higgins

Alex Emily $,\frac{04}{28}\frac{?}{24}7$:$18$ PM

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Name a natural conflict between a principal and an agent. How could this conflict be reduced?

Agent Pair: CEO$-$Shareholder.

Shareholders $($principals$)$ and their agent $($the Chief Executive Officer of a company$)$ often face a natural conflict of interests. So too do supervisors and employees. Given a scenario below which represents such a conflict, choose a method of addressing the situation so that the conflict may be reduced.

One potential conflict would be a "perk" which the CEO elects to take such as a personal jet for flying to and from business activities instead of flying commercial carriers. The cost of the jet outweighs the expense of commercial carriers so it hurts the company profits. However, the CEO feels that the private jet allows for greater supervision of the operations and hence a more efficient operation.

How could this conflict be reduced? $($Select all that apply.$)$