Principal–Agent Conflicts and Stakeholder Goals

An executive of a corporation making a decision that lowers firm profits, but which provides some form of benefit to that executive, is _most likely_ an example of:

Incorrect. The executive isn't the principal in this case. The principal is who's being harmed, not the one who's harming.

Correct! In the principal–agent relationship, the principal is the corporation's owners, or the shareholders. The agent is management, which is charged with serving the best interests of the principal. In this case, though, the agent is taking an action to harm the principal.

Incorrect. Management _is_ one of the two parties in this principal–agent conflict.

a principal harming the interests of an agent.

an agent harming the interests of a principal.

management harming the interests of both a principal and an agent.