Smilebook Ltd (Smilebook) is a global high-tech company with simple remuneration plan to senior executive managers, that is, cash bonus is paid based on current years accounting performance. From the year 2018, in addition to the cash bonus, a share ownership plan has been conducted to compensate seven senior executive mangers. 5,000 shares are (to be) awarded to each senior executive manager by equal instalments over a five-year period if the accounting profit is continuously increased by 10% each year and the share price of Smilebook is increased by no less than 5% each year.

Required:1) Identify the three potential agency problems arising from the managerial contract, and 2) explain how the senior executive share ownership plan could mitigate any one of the agency problems.