Explain how stock options can ensure compatibility between the interest of stockholders and managers.
What will be an ideal response?
When the price of the company’s stock goes down, stock options are not used. Thus, the owner of the option loses only what was paid for the option, if anything. But if the price of the stock rises, the owner can make a profit by “exercising the option.” If stock options are granted to a corporation’s management under appropriate rules, they may well be a powerful way to deal with the principal-agent problem in corporations. If managers who own stock options work harder to make the company successful, their actions can raise the market price of the corporation's stock, thereby benefiting the stockholders as well as themselves.
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Use the following table to answer the question below. Dave's Production Possibilities ScheduleSimon's Production Possibilities SchedulePounds of Green BeansPounds of CornPounds of Green BeansPounds of Corn0160080201204060408080406040120208001600Assume Dave consumes 40 pounds of green beans and 80 pounds of corn without trade. Also, assume that Simon consumes 80 pounds of green beans and 40 pounds of corn without trade. Suppose Simon and Dave specialize and that the terms of trade are 1 pound of green beans for 1 pound of corn. If Simon sells Dave 80 pounds of green beans, then the gains from trade for Simon are ________ pounds of green beans and ________ pounds of corn with trade and specialization.
A. 0, 40 B. 40, 0 C. 20, 20 D. 40, 40
Assume that the market for bread is perfectly competitive. The demand for bread is given by the equation: D = 120 - 10P and the market supply for bread is given by: S = 60 + 5P. Determine the equilibrium price and quantity of bread
What happens if the price of the bread is set at $10 per loaf? What happens if the market price is set at $2 per loaf?
Which of the following taxes causes the greatest shift of the Lorenz curve toward the line of equality?
A) proportional income tax B) regressive income tax C) flat-rate income tax D) progressive income tax
Give some explanations for the decline in union membership in the United States.
What will be an ideal response?