Jensen and Meckling's Findings

A

The answer to this question is A. Principals; agents; agents.

Jensen and Meckling, in their agency theory, focused on the relationship between principals (the owners of a company or organization) and agents (those who work on behalf of the principals). They argued that when principals hire agents to act on their behalf, there is an inherent conflict of interest, as the agents may not always act in the best interest of the principals.

To address this issue, Jensen and Meckling proposed that appropriate incentives should be given to agents to encourage them to act in the best interest of the principals. For example, agents could be given performance-based pay, where their compensation is tied to the success of the organization. This would motivate agents to work harder to improve the organization's performance and, in turn, benefit the principals.

In addition to appropriate incentives, Jensen and Meckling argued that monitoring is necessary to ensure that agents are indeed acting in the best interest of the principals. Monitoring could include regular reporting of performance metrics, audits, or oversight by a board of directors. This monitoring can help detect and address any conflicts of interest or deviations from the principals' goals.

Therefore, according to Jensen and Meckling, principals can assure themselves that agents will make optimal decisions only if appropriate incentives are given and only if the agents are monitored. This is why the answer to the question is A. Principals; agents; agents.