Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
Goal of the Firm [LO2] Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
12.Ethics and Firm Goals [LO2] Can our goal of maximizing the value of the stock conflict with other goals such as avoiding unethical or illegal behavior? In particular do you think subjects like customer and employee safety the environment and the general good of society fit in this framework or are they essentially ignored? Think of some specific scenarios to illustrate your answer.
13.International Firm Goal [LO2] Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not?
14.Agency Problems [LO4] Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding stock. Your companys management immediately begins fighting off this hostile bid. Is management acting in the shareholders best interests? Why or why not?
15.Agency Problems and Corporate Ownership [LO4] Corporate ownership varies around the world. Historically individuals have owned the majority of shares in public corporations in the United States. In Germany and Japan however banks other large financial institutions and other companies own most of the stock in public corporations. Do you think agency problems are likely to be more or less severe in Germany and Japan than in the United States? Why? Over the last few decades large financial institutions such as mutual funds and pension funds have been becoming the dominant owners of stock in the United States and these institutions are becoming more active in corporate affairs. What are the implications of this trend for agency problems and corporate control?
16.Executive Compensation [LO4] Critics have charged that compensation to top managers in the United States is simply too high and should be cut back. For example focusing on large corporations Robert Kotick CEO of Activision Blizzard earned about $64.9 million in 2013. Are such amounts excessive? In answering it might be helpful to recognize that superstar athletes such as LeBron James top entertainers such as Tom Hanks and Oprah Winfrey and many others at the top of their respective fields earn at least as much if not a great deal more.