2 questions; short answers for each. do not plagiarize

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Business Finance

The Principle-Agent Problem, To Manage Incentive You Have to Understand Motivation.

What Is the Principle-Agent Problem? Here is some help. https://www.youtube.com/watch?v=cpu0dw9VY2E

Here is our case study this week. https://www.nbcnews.com/business/business-news/another-wells-fargo-ceo-steps-down-about-damn-time-longtime-n988671

This week we look at the principle-agent problem and what when wrong at Wells Fargo. After another CEO Tim Sloan the CEO who was suppose to restore the bank’s reputation stepped down March 28, 2019 there are still huge questions. https://www.americanbanker.com/news/fed-wont-lift-wells-fargo-cap-until-deficiencies-are-fixed-powell

What about the incentive system resulted in massive creation of fake accounts by the retail operation and why did it only get worse from there? As you dig into this remember Froeb’s rule from Chapter 1″Avoid the temptation to think about the problem from the employee’s point of view…{and ask} how does the organization give employees enough information to make good decisions and the incentives to do so?” page 8

PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE.

FOR THE MAXIMUM POSSIBLE CREDIT OF 20 POINTS, YOU MUST COMPLETE ONE POST AND ONE FOLLOW-UP/REPLY. MAKE SURE BOTH THE POST AND REPLY FOCUS ON THE QUESTIONS ASKED.

QUESTION 2- What is the problem of asymmetric information? Why is it so important to understand this problem? This video is great! https://www.youtube.com/watch?v=sXPXpJ5vMnU

Many police officer positions require the applicant to have a college degree even though the tasks of a police officer rarely call upon college course material. Why don’t police departments increase their applicant pool by dropping this requirement? As you answer this question think back to last week and the problem of Type 1 and 2 errors and the human tendency to be risk-averse.