Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders? 1. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 2. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. 3. Decrease the use of restrictive covenants in bond agreements. 4. Take actions that reduce the possibility of a hostile takeover. 5. Elect a board of directors that allows managers greater freedom of action.
Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders? 1. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 2. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. 3. Decrease the use of restrictive covenants in bond agreements. 4. Take actions that reduce the possibility of a hostile takeover. 5. Elect a board of directors that allows managers greater freedom of action.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders?
| 1. |
Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. |
|
| 2. |
Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. |
|
| 3. |
Decrease the use of restrictive covenants in bond agreements. |
|
| 4. |
Take actions that reduce the possibility of a hostile takeover. |
|
| 5. |
Elect a board of directors that allows managers greater freedom of action. |
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