ExpertEasy1 markMultiple Choice
Syllabus B: Organisational structure, culture, governance and sustainabilitySyllabus BCorporate Governance
ACCA · Question 36 · Syllabus B: Organisational structure, culture, governance and sustainability
True or False: Agency theory describes the relationship where directors act as agents on behalf of the shareholders (the principals).
True or False: Agency theory describes the relationship where directors act as agents on behalf of the shareholders (the principals).
Answer options:
A.
True
B.
False
How to approach this question
Identify who owns the company (principals) and who runs it (agents).
Full Answer
A.True✓ Correct
Agency theory explains the relationship between principals (shareholders) and agents (directors/management). Corporate governance exists to ensure agents act in the best interests of the principals, rather than their own self-interest.
Common mistakes
Reversing the roles (thinking directors are principals).
Practice the full ACCA BT — Business & Technology Practice Exam 5
52 questions · hints · full answers · grading
More questions from this exam
Q01GreenCanopy, an international environmental NGO, is currently analyzing its external environment....MediumQ02QuantumLeap is a rapidly growing tech startup. A group of venture capitalists recently acquired a...MediumQ03AgriCorp produces a staple grain that forms the primary diet for a large region. Recently, AgriCo...MediumQ04AquaNet is a public utility company providing water services to a major metropolitan area. The co...MediumQ05GlobalTrade is a cross-border multinational logistics firm. The central bank of their primary ope...Medium