QUESTION 1 (25 MARKS) (UNIT 1)

You are the CEO of a company and you are considering entering into an agreement to have your company buy another company. CEOs shape strategies and often make final M&A decisions. As a CEO, you also consult your CFOs, who help identify acquisition targets, conduct due diligence, arrange financing, and engage in post-deal execution. In other words, CFOs are the Watson to the CEOs Sherlock. You think the price might be too high and you will be the CEO of the larger combined company. You expect that your pay and prestige will increase. (a) Explain the nature of the agency conflict between owners and managers arises from the above scenario. (15 marks) (b) Discuss how is it related to ethical considerations. (10 marks) [TOTAL MARKS: 25 MARKS]