PAM_334_Fall_2008_Lecture_8

PAM_334_Fall_2008_Lecture_8 - PAM3340 Lecture8 Agenda...

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PAM 3340 Lecture 8 Agenda: Managerial risk preferences Structure of shareholder voting Economics of voting Fiduciary principles Business judgment rule
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Related Issue: Does Manager  Take on Correct Risk? Do the managers have the “correct”  incentives to take on risk? Correct amount of investment in risky  projects by the firm is that amount which  maximizes shareholder value Arguments that they may take on too  little risk?
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Related Issue: Does Manager  Take on Correct Risk (con’t)? Arguments that they may take on too  much risk?
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Shareholder Voting Recall: Stockholders have the right to  vote, bondholders don’t Shareholders usually vote for the board  members, the accounting firm, also  engage in “issue voting”
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 Shareholder Voting (con’t) Issue voting  (set out in charter) usually  includes approval of certain major  actions, such as: mergers liquidations major sales of assets new charter amendments
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The Structure of Voting Corporations can structure voting as  they wish Some patterns; typically: Only shareholders vote All shares have one vote Non-voting stock is rare
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The Structure of Voting (con’t) Stockholders select the board, and the 
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This document was uploaded on 10/26/2011 for the course PAM 3340 at Cornell.

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PAM_334_Fall_2008_Lecture_8 - PAM3340 Lecture8 Agenda...

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