Question

What are some actions that stockholders can take to ensure that management’s and stockholders’ interests are aligned?

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Actions that stockholders may take to ensure management's and stockholders' interests are aligned:

1.) Create a fair and effective executive compensation plan in a way that it encourages managers and executives to perform well, at the same time, make logical decisions that will benefit the company in the long-run.

2.) Direct stockholder intervention (see page 13) - shareholders with controlling interest may vote for execution of decisions, like firing of managers, regardless of the opinion of management of the decision.

3.) Threaten a hostile takeover - this is part of #2 above. Shareholders may threaten management to acquire the firm and fire executives and managers who are not performing well.

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