Question

identify and discuss at least 2 different techniques that a stockholder can use to motivate managers to maximize stock for a company.

Answer 1

Following are 2 different techniques that a stockholder can use to motivate managers to maximize stock for a company-

1. Employee stock options with some initial lock-in period can be used as a compensation plan. It will motivate the managers to work in long term interest of the company. The good performance of the organization will finally maximize stock for a company. It will also benefit the managers of the company because value of Employee stock options will increase and managers will get extra compensation for their good performance.

2. Maximize the intrinsic value of the stock and effective communication to the stockholders to avoid any hostile takeover. The undervalued stock can create this problem because of bargain price and manager may lose their jobs after change of management.