Remember, an agency relationship can degenerate into an agency conflict when an agent acts in a manner that is not in the best interest of his or her principal. In large corporations, these conflicts most frequently involve the enrichment of the firm's executives or managers (in the form of money and perquisites or power and prestige) at the expense of the company's shareholders. This usurping and reallocation of shareholder wealth is most likely to occur when shareholders do not have sufficient information about the decisions and actions being made by the firm's management. Consider the following scenario and determine whether an agency conflict exists: Alexander owns Alexander's Tantalizing Tees, a T-shirt shop in a small college town in Georgia. With a staff of three part-time employees, Alexand operates the business in accordance with his personal goals, dreams, and capabilities. Does Alexander have an agency conflict to deal with? Yes; there is always an inherent conflict of interest between owners and operators (managers). Yes; as both the owner and operator of Alexander's Tantalizing Tees, Alexander has created the necessary agency relationship through which an agency conflict can exist. No; by having part-time, as opposed to full-time, employees, Alexander is prevented from experiencing an agency conflict. No; as both the owner and operator of Alexander's Tantalizing Tees, Alexander has not created the necessary agency relationship through which an agency conflict can exist. Which of the following actions will help ease agency conflicts and better align managers'objectives with the firm's shareholder wealth? Pay the manager a combination of salary and stock options (phased in over several years) that reward him or her for consistently increasing shareholder wealth. Pay the manager a large base salary with a huge stock option package that matures on a single date. 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. True False