In 2019, competition authorities threw out a merger of Asda and Sainsbury’s. If Sainsbury’s shareholders are concerned with managements' behaviour over reckless firm expansion, which of the following options is LIKELY to help? In 2019, competition authorities threw out a merger of Asda and Sainsbury’s. If Sainsbury’s shareholders are concerned with managements' behaviour over reckless firm expansion, which of the following options is LIKELY to help? Linking managers' salaries to the firm's growth rates. Providing stock options for the managers. Linking manager's salaries to the firm's revenue. Raising the manager's salaries. All of these will help.
Question
In 2019, competition authorities threw out a merger of Asda and Sainsbury’s. If Sainsbury’s shareholders are concerned with managements' behaviour over reckless firm expansion, which of the following options is LIKELY to help?
In 2019, competition authorities threw out a merger of Asda and Sainsbury’s. If Sainsbury’s shareholders are concerned with managements' behaviour over reckless firm expansion, which of the following options is LIKELY to help?
Linking managers' salaries to the firm's growth rates.
Providing stock options for the managers.
Linking manager's salaries to the firm's revenue.
Raising the manager's salaries.
All of these will help.
Solution
If Sainsbury's shareholders are concerned with management's behavior over reckless firm expansion, one option that is likely to help is linking managers' salaries to the firm's growth rates. This would incentivize managers to prioritize sustainable growth and discourage reckless expansion. By tying their compensation to the firm's growth, managers would have a direct financial stake in making responsible decisions that benefit the company in the long term. This approach aligns the interests of the managers with those of the shareholders and promotes responsible management behavior.
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