What institution within a firm must fail on some level for managers to be motivated to acquire another firm for the purposes of increasing their own compensation,shielding themselves against risk,or gaining prominence by running a larger firm?
A)Legal department
B)Corporate board
C)Mergers and acquisitions program
D)Firm bonus schedule
E)Corporate governance

Question

Quizplus · Accepted Answer

Corporate governance must fail or be ineffective for managers to be motivated to acquire another firm for self-serving reasons such as increasing their own compensation, shielding themselves against risk, or gaining prominence by running a larger firm. Effective corporate governance should align the interests of the managers with those of the shareholders, preventing managers from pursuing acquisitions that do not benefit the company as a whole.

What Institution Within a Firm Must Fail on Some Level