Which of the Following Actions Would Be Most Likely to Reduce

question 60

Multiple Choice

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers?

• A) Pay managers large cash salaries and give them no stock options.
• B) Change the corporation's formal documents to make it easier for outside investors to acquire a controlling interest in the firm through a hostile takeover.
• C) Beef up the restrictive covenants in the firm's debt agreements.
• D) Eliminate a requirement that members of the board of directors must hold a high percentage of their personal wealth in the firm's stock.
• E) For a firm that compensates managers with stock options,reduce the time before options are vested,i.e. ,the time before options can be exercised and the shares that are received can be sold.

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Definitions:

Rent

Payment made, typically on a monthly basis, for the use of someone else's property or land.

Complementary Resource

Assets or inputs that are used together with another resource to produce goods or services, increasing each other's value.

Price

The amount of money required to purchase a good or service.

Demand

How much of a good or service buyers intend and can afford to buy across different prices within a set timeframe.