Define agency problems and describe how they give rise to agency costs. How do

market forces$$both shareholder activism and the threat of takeover$$prevent or minimize

the agency problem? What role do institutional investors play in shareholder activism?

Answer:

Q#$5$ : Mini Case #$1$: Must Search Engines Screen Out Fake News?$($score:$1)$

During his January $11,2017,$ press conference, President$-$elect Donald Trump berated reporter

Jim Acosta and his employer, CNN$,$ saying, $$You are fake news.$$ For news organizations to

question the validity of facts cited by politicians was nothing unusual, especially during an

election year, but throughout the $2016$ presidential election cycle, Trump turned that dynamic on

its head through his confrontations with CNN and other news organizations. These exchanges

sparked a debate about the responsibility of Google, Facebook, and other Internet$-$based

companies to identify websites spreading fake news.

Google offers an interesting case study on value maximization and corporate ethics. In $2004,$

Google$$s founders provided $$An Owner$$s Manual$$ for shareholders, which stated that $$Google

is not a conventional company$$ and that the company$$s ultimate goal $$is to develop services that

significantly improve the lives of as many people as possible.$$ The founders stressed that

running a successful business is not enough; they also want Google to make the world a better

place. In light of that objective, what responsibility did Google have in helping voters distinguish

real news from fake news? Just one month before the election, Google introduced a new $$fact$-$