Response to the following questions:
1. What is an agency cost? Give three examples of agency costs.
2. The Sununu Corporation is having a bit of a problem: The executives are using the corporation's jets for personal reasons, such as traveling on vacation and visiting doctors in other cities. The board of directors wants management to cut down on this type of activity.
a. In terms of the different types of agency costs, how would we classify the misuse of corporate jets?
b. What measures can the board take to reduce or eliminate the misuse of the corporate jets?