Which of the following is an example of an agency conflict?
Managerial self-dealing
An agency conflict occurs when there is a conflict of interests between two parties in a relationship where one party acts as an agent to the other. One example of an agency conflict is when a company’s managers act in their own best interest rather than in the best interest of the shareholders. In this case, the managers may take decisions that maximize their own personal gain, such as increasing their salaries or bonuses, rather than making decisions that maximize the value of the company for the shareholders. This conflict of interest between managers and shareholders can ultimately lead to a decrease in the company’s overall performance and profitability. Therefore, agency conflicts can have negative impacts on both parties involved.
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