When are the interests of stockholders and senior managers likely to be most closely aligned?

Question

Quizplus · Accepted Answer

When senior managers receive most of their compensation in the form of stock options, their interests are closely aligned with those of stockholders. This is because the value of their compensation is tied to the performance of the company's stock, which incentivizes them to work towards maximizing shareholder value. This also aligns with the theory of agency costs, which suggests that managers may act in their own self-interest rather than that of shareholders. By receiving compensation in the form of stock options, they are motivated to act in the best interests of the shareholders.

When Are the Interests of Stockholders and Senior Managers Likely