Question

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

a. Poison pills.

b. Shareholder rights provisions.

c. Abnormally high executive compensation.

d. Targeted share repurchases.

e. Restricted voting rights.

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

a. To help prevent a hostile takeover.

b. To increase worker productivity.

c. To help retain valued employees.

d. To enable the firm to borrow at a below-market interest rate.

e. To make it easier to grant stock options to employees.

Answer 1

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Answer

1)

Abnormally high executive compensation.

By paying higher compensation this method is propogating for a hostile takeover by the firms as opposed to being a barrier to takeovers. Other options including poisson pills, shareholders right provisions and restricted voting rights prevent hostile takeovers to some extent

2)

To make it easier to grant stock options to employees.

There are several reasons in granting ESOPS

To make a barrier to hostile takeovers, to increase workers productivity, to retain existing employees and to enable borrow at lower market interest rates. However it is not granted for easier productivity to employees