How to differentiate them? e.g: Car company T has a lot of cash on hand. Mr. A just joined company T as CEO, and he wants the Company T to build another factory, and to use the same technology which he used in his previous employer.
This is the case of Entrenchment if the investment decision was purely made based on keeping the job secure and this investment doesn’t add much value to the shareholders.
e.g 2: Car company T has a lot of cash on hand. Mr. B just joined company T as CEO, and he wants the Company T to build another factory and hires his previous employer C as the construction consultant. Which one is this?
Isn’t that not using “tax” efficiently? They’re making business decisions based on relationships.
extravagant. I am going to buy a Boeing business jet or create a factory made out of stainless steel because it looks cool. Entrenchment, we are an Internet company but I am going to buy a tv company because I am the only one who knows tv. Hiring another employee and entrenching him could be entrenchment.
b) Exravagant projects is when management continue to invest in high profile or pet projects even though the return on the investments is not in the best interest of the company and its shareholders c) Entrechement – when managers invest in bad projects but in projects where they have a strong understanding so that they become more valuable to the company Copied from another thread.