Question

Corporate managers work for the owners of the corporation.​ Consequently, they should make decisions that are in the interests of the​ owners, rather than in their own interests. What strategies are available to shareholders to help ensure that managers are motivated to act this​ way?

Shareholders can do the following:
(select all the choices that apply.)
A. Write contracts that ensure that the interest of the managers and shareholders are closely aligned.
B. Ensure that employees are paid a percentage of the company's net income.
C. Mount hostile takeovers.
D. Ensure that employees are paid with company stock and/or stock options.
E. Ensure that under-performing managers are fired.

Answer 1

Shareholders can write contracts, offer stock compensation, and mount hostile takeovers as strategies to ensure managers act in the interests of the owners.

Step-by-step explanation:

Shareholders have several strategies available to help ensure that managers are motivated to act in the interests of the owners:

1. Write contracts: Shareholders can write contracts that align the interests of managers and shareholders, ensuring that managers prioritize the company's success.
2. Stock compensation: Offering employees company stock and stock options can align their interests with shareholders since the value of their compensation will be directly tied to the company's performance.
3. Hostile takeovers: Shareholders can mount hostile takeovers as a means of removing underperforming managers and replacing them with individuals who are more likely to act in the owners' best interests.

Answer 2

Answer: The correct answers are "A. Write contracts that ensure that the interest of the managers and shareholders are closely aligned.", "C. Mount hostile takeovers.", "D. Ensure that employees are paid with company stock and/or stock options." and "E. Ensure that under-performing managers are fired.".

Explanation: The strategies that are available to shareholders to help ensure that managers are motivated to act this​ way are:

• Write contracts that ensure that the interest of the managers and shareholders are closely aligned. - This ensures that managers and shareholders point in the same direction.
• Mount hostile takeovers.
• Ensure that employees are paid with company stock and/or stock options. - In this way they motivate employees to work in favor of the interests of the shareholders.
• Ensure that under-performing managers are fired. - Dismissing managers who have poor performance pressure managers to work hard and for the benefit of shareholders.