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Which is best bonding expenditure to help limit agency cost

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Reference no: EM132757139

Problem 1: Which of the following is one of the most expensive methods for the firm to overcome agency costs?

a. let the Securities and Exchange Commission inform the firm of a problem

b. proper design of an executive's compensation contract

c. monitor the executive's work

d. require executives to own a large proportion of their firm's outstanding shares

Problem 2: Which of the following is the best bonding expenditure to help limit agency costs?

a. auditing the managers work on a monthly basis

b. a contract whereby the manager will forfeit a portion of his deferred compensation in the event of poor performance

C. granting the manager a large number of options that will become valuable if the firm performs well

d. paying the manager a bonus if the firm performs well

Reference no: EM132757139

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