May be fairly easy… The purpose of the board of directors is to act as an intermediary between shareholders and management to assure that management is acting in shareholders’ best interest. Which of the following is NOT a factor that may cause directors to align more closely with managers than shareholders? A) Directors receive excessive compensation. B) Directors are employed by financial institutions that lend money to the firm. C) Directors are responsible for CEO succession planning. D) Members of senior management serve as directors for companies run by board members.
also going C, def not B or D… mayyybe A but i like C more
ok… yes its C Heres the question… Why not B… If a bank that the firm borrowed from has seats on the board, the firm is not very likely to manipulate earnings as the bank would be an investor in the firm. You would think this would not align directors more closely with managers… Any thoughts?
I think bank would be concerne about the interest and principal only!! They dont care about the growth
chadtap Wrote: ------------------------------------------------------- > ok… yes its C > > Heres the question… > > Why not B… If a bank that the firm borrowed from > has seats on the board, the firm is not very > likely to manipulate earnings as the bank would be > an investor in the firm. You would think this > would not align directors more closely with > managers… > > Any thoughts? I think the issue there is they would be more inclined to make decisions from the view of a creditor, rather than a shareholder, especially if there is any distress in the firm. So there would be an inherant conflict.
A, B and D create conflict of interest, C doesn’t
There is no incentive for a creditor to see a firm maximize its overall value…they just want there debt payments and could care less about the stock price.
all good points… thanks