The concept of double-agency in society refers to the conflict of interest between

The concept of double-agency in society refers to the conflict of interest between
A . corporate CEOs and shareholders
B . money managers and asset owners.
C . corporate CEOs and money managers

Answer: B

Explanation:

The concept of double-agency in society refers to the conflict of interest between money managers and asset owners. This concept arises when there are two levels of agency relationships, each with potential conflicts of interest.

Principal-Agent Relationship: In the first level, asset owners (principals) delegate the management of their assets to money managers (agents). The money managers are expected to act in the best interests of the asset owners, but their own interests might not always align with those of the asset owners.

Secondary Agency: The second level involves the relationship between the corporate CEOs (agents) and the company’s shareholders (principals). Here, the CEOs are supposed to act in the best interests of the shareholders, but again, there might be conflicts of interest.

Double-Agency Conflict: The double-agency conflict occurs because the money managers, who are

agents of the asset owners, also act as principals when dealing with corporate CEOs. This dual role can lead to conflicts where the money managers’ decisions may benefit themselves or the CEOs rather than the asset owners.

Reference: MSCI ESG Ratings Methodology (2022) – Explains the principal-agent relationships and how conflicts of interest can arise at multiple levels, leading to the double-agency problem.

ESG-Ratings-Methodology-Exec-Summary (2022) – Discusses the importance of aligning interests between asset owners, money managers, and corporate executives to mitigate the double-agency issue.