Before executives can "manage," they must be clear on the goals to be pur- sued, both personal and corporate. The two major philosophies described in the chapter, shareholder wealth maximization and corporate wealth maximiza- tion, could lead a firm's management to make very different decisions.

a. A leveraged buyout is a financial maneuver in which a group of investors gains control of a firm and then liquidates its assets (i.e., disposes of all or a part of the company's productive assets) in order to pay off the pur- chase price. How would this be perceived in a country that believed in corporate wealth maximization? In a country that believed in share- holder wealth maximization?

b. In an interlocking directorate, the members of the governing board of one firm also sit on the governing board of a second firm. How is this practice likely to be perceived under the two philosophies of SWM and CWM? C. In some countries, labor unions are represented on boards of directors by virtue of statutes that prescribe such membership. How might this help serve the goals of either of the two philosophies? How might it be detrimental to those goals?

d. How would each philosophy view a strategy of employing high leverage? Under which model is leverage likely to be higher?

e. How would each philosophy view a strategy of diversification that cre- ates a conglomerate?

f. How would cach philosophy view a strategy to achieve focus by divesting some operations?