Describe the 3 value destroying activities (empire building, over investment of free cash flow, and managerial entrenchment) and link this to the agency problem and discuss the severity of these destroying activities.

Executive compensation structures that align managers' interests with those of shareholders' are the potential solution of the agency problem. Give examples of the type of compensation structures that can cope with these value destroying activities. Discuss and link the compensation structure that are designed specifically to cope with the value destroying activities that was mentioned.

And comment on whether these structures are effective or are there any associated problems.