Question

One of the discretionary accounts managed by Farnsworth is the Jones Corporation employee profit-sharing plan. Jones, the company president, recently asked Farnsworth to vote the shares in the profit-sharing plan in favor of the slate of directors nominated by Jones Corporation and against the directors sponsored by a dissident stockholder group. Farnsworth does not want to lose this account because he directs all the account's trades to a brokerage firm that provides Farnsworth with useful information about tax-free investments. Although this information is not of value in managing the Jones Corporation account, it does help in managing several other accounts. The brokerage firm providing this information also offers the lowest commissions for trades and provides best execution. Farnsworth investigates the director issue, concludes that the management-nominated slate is better for the long-run performance of the company than the dissident group's slate, and votes accordingly. Farnsworth:

Answer 1

Shareholders in a public company have the right to vote for a board of directors. Farnsworth, managing the Jones Corporation employee profit-sharing plan, votes in favor of the management-nominated slate based on his analysis of the company's long-term performance. His decision is influenced by the benefits he receives from maintaining the account.

Step-by-step explanation:

The subject of this question is Business.

When a company decides to sell stock to the public, it becomes a public company and the shareholders own it. Shareholders have the right to vote for a board of directors, who then hire executives to run the company. The number of votes a shareholder has is based on the number of shares they own. In this case, Farnsworth, who manages the Jones Corporation employee profit-sharing plan, is being asked by the company president to vote in favor of the management-nominated slate of directors.

Farnsworth considers the long-term performance of the company and investigates the director issue. Based on his analysis, he concludes that the management-nominated slate is better for the company and votes accordingly. Farnsworth's decision is influenced by his desire to maintain the profit-sharing plan account, which allows him to access useful information about tax-free investments and benefits several other accounts he manages.