Question

6. Stockholder and manager conflicts Executive compensation packages often tie performance to bonus and incentive awards, supplemental retirement packages, perquisibes, and severance pay, in order to encourage the management team to align their performance with organizational goals. In an attempt to minimize agency problems in a company (potential confict of interest between the company's managers and shareholders), attractive compensation packages are created to retain and encourage managers. In the best interest of shareholders, compensation packages should be structured in a way such that managers have an incentive to maximize the value of the company's stock price. vision Tech is a softwa there is relatively lite individual ownership. If these institutions dilute their positions and sell off their stake in vision Tech's stock to several individual investors, would direct shareholder intervention be more or less likely to motivate the firm's management? are company based out of San Francisco. Its stockholders are mosty institutional investors and O Less likely O More likely Vision Tech's stock price is currently trading at $22 per share. The consensus among analysts is that the intrinsic alue of vision Tech's stock is $32 per share. Is Vision Tech more or less likely to receive a hostile takeover bid? O Less likely O More likely

Answer 1

1: Intrinsic value

(The management must have stock options which will induce them to work towards the increasing the intrinsic value of the share)

2: Less likely

Earlier the shares were held by institutional investors who are more powerful in unison to influence the management. Individual owners cannot much influence the management

3: More likely

Since the stock price is trading substantially below the intrinsic price, the company is prone to a takeover bid.