1. In the wake of corporate scandals at Enron, Tyco, and WorldCom, some argue that managers of large, publicly owned firms sometimes make decisions to maximize their own welfare as opposed to that of stockholders. Does such behavior create problems in using value maximization as a basis for examining managerial decision making?

2. What are some potential benefits to companies of paying executives with stock options? What are some potential risks to companies of paying executives with stock options?