6. Stockholder and manager conflicts

Executive compensation packages often tie performance to bonus and incentive awards, supplemental retirement packages, perquisites, and severance pay, in order to encourage the management team to align their performance with organizational goals.

In an attempt to minimize agency problems in a company (potential conflict of interest between the company's managers and shareholders), attractive compensation packages are created to retain and encourage managers. In the best interest of shareholders, compensation packages should be structured in a way such that managers have an incentive to maximize the ________() value of the companys stock price.

Vision Tech is a software company based out of San Francisco. Its stockholders are mostly institutional investors and there is relatively little individual ownership. If these institutions dilute their positions and sell off their stake in Vision Techs stock to several individual investors, would direct shareholder intervention be more or less likely to motivate the firms management?

a) More likely

b) Less likely

Vision Techs stock price is currently trading at $22 per share. The consensus among analysts is that the intrinsic value of Vision Techs stock is $29 per share. Is Vision Tech more or less likely to receive a hostile takeover bid?

a) Less likely

b) More likely