Q. 1. One of the approaches for the Southern Company to comply with the Clean Air Act is to adopt fuel-switching technique. Why do you think this strategic flexibility would have value to Southern Company's shareholders?
2. Explain several dimensions of the shareholder-principal conflict with manager agents known as the problem of principal-agent. To alleviate agency problems between senior executives and shareholders, should the compensation committee of the board devote more too executive salary and bonus (cash compensation) or more to long-term inducements? Why? Elucidate the role that does each type of pay play in motivating managers?'
3. Corporate profitability declined by 20 percent from 2008 to 2009. What performance percentage would you use to trigger executive bonuses for that year? Why? Elucidate problems that would arise with hiring and retaining the best managers?
4. In economics principles courses, textbooks emphasize that the goal of the frim is to maximize profits. Is this the same thing as maximizing shareholder wealth? why or why not ?