Both Biondo and Cramer are large public corporations with subsidiaries throughout the world. Biondo uses a centralized approach and makes most of the decisions for its subsidiaries. Cramer uses a decentralized approach and its subsidiaries make many of their own decisions.
a. Would the agency problem be more pronounced for Biondo or Cramer? Explain.
b. Would agency costs likely be higher for Biondo or Cramer? Why?
c. Discuss a major advantage and a major disadvantage to a centralized approach such as Biondo uses.
d. Discuss a major advantage and a major disadvantage to a decentralized approach such as Cramer uses.