Paraphrase It has long been recognized that managers' personal goals may compete with shareholder wealth maximization. In particular, managers might be more interested in maximizing their own wealth than their stockholders' wealth; therefore, managers might pay themselves excessive salaries. Effective executive compensation plans motivate managers to act in their stockholders' best interests. Useful motivational tools include (1) reasonable compensation packages, (2) firing of managers who don't perform well, and (3) the threat of hostile takeovers