A fundamental problem in finance is that of a principal agent relationship. This type of problem exists between managers of a firm and its shareholders.

Please select the most appropriate answer.

a. All such problems can be solved completely by writing good management contracts.

b. The use of stock options to reward managers addresses this issue perfectly.

c. Writing good management contracts and having good corporate governance policies in place help to modify the severity of all such problems.

d. Both "b" and "c" are correct answers

e. Create a firm with only employees as shareholders and managers, this way all conflicts will be resolved.