Tutorial Questions

Question 1

Corporate managers work for the owners of a corporation. When making decisions that are in the interest of the owners, what are strategies to ensure that managers are motivated to act this way?

1.
2.
3.

Answer 1

• ensuring employees are paid with company stock or stock options
• ensure that underperforming manahgers are fired
• write contracts ensuring that the interests of managers and shareholders are closely aligned

Question 2

Situation:
- company receives order woth EUR 5 million
- you fill in order with inventor worth EUR 2 million
- customer picks up order and pays back EUR 1 million in cash as advance payment