Agency Problem

question 50

Essay

Agency Problem. In 2005, Qwest Communications International Inc. ended its pursuit of MCI Inc. While the Denver-based company had worked hard to win Virginia-based MCI, Qwest walk away from a bidding war with Verizon Communications Inc., a large New York-based phone company, when Qwest's increasingly expensive effort seemed futile. Ending a furious three-month bidding war, long-distance phone titan MCI turned down a $9.74 billion takeover offer from Qwest, a local and long-distance phone company, in favor of a $8.44 billion offer from the more financially secure Verizon. At the time, some of MCI's largest shareholders criticized MCI's board for taking the lower bid and urged Qwest to persist, but Qwest declined.
A. What is the potential agency problem at Qwest?
B. What is the source of agency problems within Qwest and similar companies?

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Definitions:

Lanham Act Of 1947

A federal statute that governs trademarks, service marks, and unfair competition, providing protection for brands and consumers in the United States.

U.S. Patent And Trademark Office

The federal agency responsible for granting patents and registering trademarks, thereby protecting intellectual property in the United States.

Trademark

A symbol, word, or phrase legally registered or established by use as representing a company or product.

Nonfunctional

Refers to elements or features of a system, product, or service that do not operate as intended or do not serve their intended purpose.