Agency theory would imply that conflicts are more likely to occur between management and shareholders when:
A. the CEO has big ownership of the companies.
B. management acts in the best interests of maximizing long-term shareholder wealth.
C. the chairman of the board is also the chief executive officer (CEO).
D. the board of directors exerts strong and involved oversight of management.

Agency theory suggests conflicts are likely when there is a misalignment of interests between management and shareholders. The most prominent scenario for conflicts is when the chairman is also the CEO, as this can lead to unchecked power. This situation diverges from the goals of shareholder wealth maximization, increasing the potential for conflicts. ;

Answered by GinnyAnswer | 2025-07-05

Agency theory suggests that conflicts are likely to occur when the chairman of the board is also the CEO, as this can lead to a lack of independent oversight. In contrast, strong ownership by the CEO, aligned interests with shareholders, and engaged board oversight generally reduce conflicts. Therefore, the correct answer is option C.
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Answered by Anonymous | 2025-07-07