Corporate governance involves the manner in which shareholders objectives are implemented, and it is reflected in a companys policies and actions. Agency conflicts can occur when managers pay themselves excessive salaries and obtain unreasonably large stock options at the expense of the stockholders. There are several laws to regulate the financial markets, one of which is the Sarbanes-Oxley Act.

This case analysis will allow students to be able to identify rules, laws, and procedures that influence a companys operations and the possible decisions made by managers as well as provisions that are internal to a firm that are under the control of the managers.

1. Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?
2. What is block ownership? How does it affect corporate governance?