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Threat of takeover.

Managerial compensation: Managerial compensation is constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.

Direct intervention by stock holders: Today, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. These large institutional stockholders have the ability to exert influence on managers and as a result the firms operations.

Treat of Firing: If stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.

Threat of takeover: If a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.

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Erin Bode

Lvl 10
2y ago

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What are some actions that stockholders can take to ensure that management's and stockholders' interestes are aligned?

Threat of takeover.Managerial compensation: Managerial compensation is constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.Direct intervention by stock holders: Today, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. These large institutional stockholders have the ability to exert influence on managers and as a result the firms operations.Treat of Firing: If stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.Threat of takeover: If a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.


How did Williams actions support his statement?

Williams' actions supported his statement by following through with the promises or commitments made in the statement. If his actions aligned with the words he had spoken, it demonstrated consistency and reliability in his behavior, reinforcing the credibility of his statement.


What are some mechanisn that encourage manager to act in the best interests of stockholder?

Four primary mechanisms are used to motivate managers to act in stockholders' best interests:Managerial compensationDirect intervention by stockholdersThreat of firingThreat of takeovers1.Managerial CompensationManagerial compensation should be constructed not only to retain competent managers, but to align managers' interests with those of stockholders as much as possible.This is typically done with an annual salary plus performance bonuses and company shares.Company shares are typically distributed to managers either as: Performance shares, where managers will receive a certain number shares based on the company's performance.Executive stock options, which allow the manager to purchase shares at a future date and price. With the use of stock options, managers are aligned closer to the interest of the stockholders as they themselves will be stockholders.2.Direct Intervention by StockholdersToday, the majority of a company's stock is owned by large institutional investors, such as mutual funds and pensions. As such, these large institutional stockholders have the ability to exert influence on mangers and, as a result, the firm's operations.3.Threat of FiringIf stockholders are unhappy with current management, they can encourage the existing board of directors to change the existing management, or stockholders may even re-elect a new board of directors that will accomplish the task.4.Threat of TakeoversIf a stock price deteriorates because of management's inability to run the company effectively, competitors or stockholders may take a controlling interest in the company and bring in their own managers.


How do you create a convergence between the interests of stockholders and managers?

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