Michael owns Michael's Tantalizing Tees, a T$-$shirt shop in a small college town in New Hampshire. With a staff of three part$-$time employees, Michael operates the business in accordance with his personal goals, dreams, and capabilities.

Does Michael have an agency conflict to deal with?

No; by having part$-$time, as opposed to full$-$time, employees, Michael is prevented from experiencing an agency conflict.

Yes; there is always an inherent conflict of interest between owners and operators $($managers$).$

Yes; as both the owner and operator of Michael's Tantalizing Tees, Michael has created the necessary agency relationship through which an agency conflict can exist.

No; as both the owner and operator of Michael's Tantalizing Tees, Michael has not created the necessary agency relationship through which an agency conflict can exist.

Consulting firms and human resource departments have spent innumerable hours attempting to develop executive compensation programs that will align the goals of a firm's managers with those of the firm's shareholders. Which of the following compensation packages is most likely to accomplish this task?

An annual salary of $$800,000$

An annual salary of $$500,000$ and a stock option bonus package that provides $100,000$ shares after one year

An annual salary of $$500,000$ and a stock option bonus package for a total of $250,000$ shares, with $50,000$ shares vesting at the end of each of the next five years

An annual salary of $$250,000$ and a stock option bonus package that provides $250,000$ shares after five years

True or False: A small number of institutional investors are often able and motivated to bring direct shareholder pressure on a firm's management in an effort to reduce potential agency conflicts.

False

True