The Legal Environment of Business: Text and Cases
10th Edition
ISBN: 9781337535878
Author: Frank B. Cross; Roger LeRoy Miller
Publisher: Cengage Learning US
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Chapter 12, Problem 5BCP
Summary Introduction
Case s ummary: A person E was working as a district sales manager in company TCP. The company announced a bonus plan giving 200
To find : The indefiniteness of the bonus plan of company TCP to be an offer.
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Day 1/Chapter 1 Case Study: Guided Practice
WILLIAMS MACHINE TOOL COMPANY
For 85 years, the Williams Machine Tool Company had provided high-quality products to its
clients, becoming the third largest U.S.-based machine tool company by 1990. The company was
highly profitable and had an extremely low employee turnover rate. Pay and benefits were
excellent.
Between 1980 and 1990, the company's profits soared to record levels. The company's success
was due to one product line of standard manufacturing machine tools. Williams spent most of its
time and effort looking for ways to improve its bread-and-butter product line rather than to
develop new products. The product line was so successful that companies were willing to modify
their production lines around these machine tools rather than asking Williams for major
modifications to the machine tools.
By 1990, Williams Company was extremely complacent, expecting this phenomenal success
with one product line to continue for 20 to 25 more…
The Acme Electric Company worked day and night to develop a new current regulator designed to cut the electric power consumption in aluminum plants by 35%. They knew that, although the competition was fierce, their regulator could be produced more cheaply, was more reliable, and worked more efficiently than the competitors’ products. The owner, eager to capture the market, personally but somewhat hastily put together a 120-page proposal to the three major aluminum manufacturers, recommending that their regulators be installed at all company plants. She devoted the first 87 pages of the proposal to the mathematical theory and engineering design behind his new regulator, and the next 32 to descriptions of the new assembly line she planned to set up to produce regulators quickly. Buried in an appendix were the test results that compared her regulator’s performance with present models, and a poorly drawn graph showed how much the dollar savings would be. Acme Electric didn’t get the…
At a recent board meeting of Co., a non-executive director suggested that the company’s remuneration committee should consider scrapping the company’s share option scheme, since the executives could be rewarded by the scheme even when they do not perform well. A second non-executive director had a view that, even when the executives act in ways which decrease the agency problem, they might not be rewarded by the share option scheme if the stock markets were in decline.
REQUIRED: Explain the nature of the agency problem and discuss the use of share option schemes and performance-related pay as methods of reducing the agency problem in a stock-market listed company.
Chapter 12 Solutions
The Legal Environment of Business: Text and Cases
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