Question

Which of the following are effective means of aligning management goals with shareholder interests?

I. Employee stock options
II. Threat of a takeover
III. Management bonuses tied to performance goals
IV. Threat of a proxy fight

A. I and III only
B. II and IV only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV

Answer 1

E. I, II, III, and IV

Step-by-step explanation:

All of the mentioned strategies would work.

Employee stock option provides the enthusiasm and energy to perform good among employees. This is beneficial for the company and shareholders as well.

The threat of takeover, scares the shareholders in losing their share, and effective voting right. Also the management feels threaten as the new company might replace them with the management personnel they desire.

Management bonuses help management to get a boost in energy and accordingly motivates to work good, also the shareholders desiring performance will find it effective.

The threat of proxy fight engages both the parties to behave properly towards each other and respect each other.