Question

A major cost of the separation of ownership and control of corporations is that the managers of the corporation may sometimes act in their own best interest as opposed to shareholders’ interests. What can shareholders do to discipline self-interested managers? [SELECT ALL THAT APPLY.] Question 2 options: fire them vote to replace the board of directors who can replace the self-interested managers reduce their pay (fine them) sell shares to push down the stock pric

Answer 1

Answer:

a. vote to replace the board of directors who can replace the self-interested managers

b.  fire them

Explanation:

In a corporations in which the major aim is to promote the interest of the shareholders, there is bound to be class of interest between the managers and the shareholders.

Most times, the manager will try to pursue his own personal interest at the detriment of the organization. Firing such managers and, in most cases, voting during board meetings to replace them are ways to put the organization back to business.