Section A

Agency theory highlights the potential conflict of interest between shareholders (principals) and directors (agents).

Which of the following mechanisms are designed to achieve 'goal congruence' and reduce agency costs? (Select ALL that apply)

Goal congruence occurs when the actions of the agents (directors) naturally lead to the achievement of the principals' (shareholders) objectives. This can be achieved through: 1. Incentive schemes (e.g., Executive Share Option Schemes) that tie wealth to share price. 2. Monitoring and governance (e.g., independent non-executive directors, audit committees) to ensure directors act appropriately.