Question：Which of the following would not be a characteristic of the principal-agent relationship?

　　A. The agent must account for the money he has gained working on his principal's behalf.

　　B. The agent should keep in confidence what he knows of the principal's affairs even after the agency relationship has ceased.

　　C. The agent may disobey the principal if he believes disobedience is in the principal's best interests.

　　D. If the agent has not been paid, he is not bound to carry out his agreed duties.

　　E. The agent normally has a duty to perform the task himself and not delegate it to other people.

　　The correct answer is: The agent may disobey the principal if he believes disobedience is in the principal's best interests.

　　The agent cannot disobey the principal for this reason. He can disobey the principal if the principal requires him to carry out an illegal act.

　　Question：Which of the following remuneration methods may be used to align the interests of directors (agents) with those of shareholders (principals)?

　　A. Profit-related pay

　　B. Executive pension scheme contributions

　　C. Executive share option plans

　　D. Shares

　　E. High basic salary

　　The correct answers are: Profit-related pay; Shares; Executive share option plans.

　　These methods link remuneration with company performance and hence encourage directors to maximize company value, in line with shareholder objectives. High basic salary and executive pension scheme contributions don't have the link with performance.