The risk of "sell dealing" behavior (managers acting in their own interests), such as in the case of Computer Associates, increases significantly the management is paying dividends to shareholders on time top management compensation is tied with the profitability of the company instead of sales the company board is dominated by "insiders" the company board members do not have any ties with the management the company board has a number of 'outsiders QUESTION 2 When a firm has a lot of free cash (in excess of the current debt obligations), managers: always invest all of the free cash into diversification always invest all of the free cash in the best interest of shareholders Dneed to ensure that the diversification activities using the free cash have a higher ROIC than the stockholders would have otherwise obtained by investing the free cash in a portfolio of stocks and bonds always pay it back to the firm's shareholders in the form of dividends Dalways invest all of the free cash into related diversification When two or more business units of a firm share resources (eg. the disposable diapers unit and the paper towels unit of Procter & Gamble sharing marketing expenses), a company (Procter & Gamble) is pursuing which of the following strategies? Diversification based on economies of scale Joint venture Divertification based on economies of scope Vertical integration Diversification based on acquisition and restructuring