Methods of encouraging managers to act in shareholders' best interest include:
I. Threat of takeover.
II. Proxy fights for control of the board of directors.
III. Tying managers' compensation to stock price performance.

Question

Quizplus · Accepted Answer

The threat of takeover and proxy fights directly target the control of the board, ensuring that decisions made are in the best interest of shareholders. Tying managers' compensation to stock price performance aligns their interests with shareholders and provides an incentive to improve performance. Collectively, all three methods serve as checks and balances to encourage managers to act in shareholders' best interest.

Methods of Encouraging Managers to Act in Shareholders' Best Interest