The best definition of agency problem is:

A) The possibility of conflicts between shareholders and management in a large corporation.
B) The process of planning and managing a firm's long-term investments.
C) Determining the optimal mix of internal and external board of directors.
D) The purchase or sale of securities whose value derives from the price of another, underlying, asset.
E) Determining who should be the agent of corporate executives.

Agency Problem

A conflict of interest between a company's management and its shareholders, where the management may act in their own best interests rather than those of the shareholders.

Shareholders

Individuals or entities that own shares of stock in a corporation, giving them ownership interests and possibly rights to dividends and voting.

Management

Management involves the organization and coordination of activities to achieve defined objectives, typically within a business setting.