Week 4 Assignment

W4 Assignment "Chapter 13"

MINI CASE PAGE 544,

DO ONLY a, b, c, h, i, j, k

Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your

product is a software platform that integrates a wide range of media devices, including

laptop computers, desktop computers, digital video recor

ders, and cell phones. Your

initial market is the student body at your university. Once you have established your

company and set up procedures for operating it, you plan to expand to other colleges in

the area, and eventually to go nationwide. At some poi

nt, hopefully sooner rather than

later, you plan to go public with an IPO, and then to buy a yacht and take off for the

South Pacific to indulge in your passion for underwater photography. With these issues in

mind, you need to answer for yourself, and pot

ential investors, the following questions.

a

. What is an agency relationship? When you f

irst begin operations, assuming you are

the only employee and only your money is invested in the business, would any agency

conflicts exist? Explain your answer.

b.

If you expanded and hired additional people to help you, might that give rise to

agency pro

blems?

c.

Suppose you need additional capital to expand and you sell some stock to outside

investors. If you maintain enough stock to control the company, what type of agency

conflict might occur?

h.

List three provisions in the corporate charter that affect takeovers.

i.

Briefly descr

ibe the use of stock options in a compensation plan. What are some

potential problems with stock options as a form of compensation?

j.

What is block ownership? How does it affect corporate governance?

k

. Briefly explain how regulatory agencies and legal sy

stems affect corporate

governance.

W4 Assignment "Chapter 13"

MINI CASE PAGE 544, DO ONLY a, b, c, h, i, j, k

Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your

product is a software platform that integrates a wide range of media devices, including

laptop computers, desktop computers, digital video recorders, and cell phones. Your

initial market is the student body at your university. Once you have established your

company and set up procedures for operating it, you plan to expand to other colleges in

the area, and eventually to go nationwide. At some point, hopefully sooner rather than

later, you plan to go public with an IPO, and then to buy a yacht and take off for the

South Pacific to indulge in your passion for underwater photography. With these issues in

mind, you need to answer for yourself, and potential investors, the following questions.

a. What is an agency relationship? When you first begin operations, assuming you are

the only employee and only your money is invested in the business, would any agency

conflicts exist? Explain your answer.

b. If you expanded and hired additional people to help you, might that give rise to

agency problems?

c. Suppose you need additional capital to expand and you sell some stock to outside

investors. If you maintain enough stock to control the company, what type of agency

conflict might occur?

h. List three provisions in the corporate charter that affect takeovers.

i. Briefly describe the use of stock options in a compensation plan. What are some

potential problems with stock options as a form of compensation?

j. What is block ownership? How does it affect corporate governance?

k. Briefly explain how regulatory agencies and legal systems affect corporate

governance.