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:

Diplomacy

The practice of conducting negotiations between representatives of states or groups to manage international relations, resolve disputes, and facilitate agreements.

Foreign Governments

Foreign governments refer to the official governing bodies of nations other than one’s own, involved in international relations and diplomacy.

Government

Government is the system or group of people governing an organized community, often a state, setting and administrating public policy and exercising executive, political, and sovereign power.

National Security Council

A federal agency within the executive branch that advises the President on domestic, foreign, and military matters related to the nation's security.