Question

The management of Badger Corp. controls 58% of the company's stock. The firm did not meet any of its quarterly sales projections for the last year. Some of the firm's institutional investors are worried that the firm's poor performance is partly because management has not been focused on maximizing shareholder wealth. Which of the following measures would the institutional investors most likely want to see implemented? a. They would want the company to ban targeted share repurchases. b. They would want to make sure the company's charter contains a shareholder rights provision. c. They would want to make sure the company has a restricted voting rights provision

Answer 1

B. They would want to make sure the company's charter contains a shareholder rights provision.

Step-by-step explanation:

If institutional investors believe that the company's poor performance is because management has not focused on maximizing shareholder wealth, they would probably support an amendment to the company's charter that provides a provision that ensures that management is obliged to maximize shareholder wealth.

Like this, management could not ignore this function because it would be codified in the company's charter. It is analogous to when citizens acquire certain rights that cannot be violated by governments because those rights are protected under a constitution.