Firms must provide the right incentives if they are to get managers to focus on long-run alue maximization Conflicts exist between managers and stockholders and between stockholders (represented by managers) and older. Managers personal goals may compete with shareholder wealth maximization. However, managers can be motivated to set in their stockholdersbest interests through (1) resonable competition packages, (a) ring managers, and (3) the threat of hostile takeovers 11 firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover enerally receive feed payments regardless of how the form does, while wear higher returns when the firm's comings are higher Investments in ventures, that have great payoff to stockholders it soccessful but threaten bankruptcy if they all create conflict. In addition, the additional but increased to holder debtholder conta consequently, tiondholders attempt to protect themselves by including in bond agreements that imit firma. use of additional and constrain action