Question 3 Mrs Greenwood has recently been appointed as the marketing director of a listed...
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Question 3 Mrs Greenwood has recently been appointed as the marketing director of a listed company and has just attended her first board meeting where the phrase "the agency problem" was frequently mentioned. She was also informed at the meeting that she is eligible to join the executive share option scheme. As Mrs Greenwood has not previously studied corporate finance, she was rather confused about these issues and has asked for your help to clarify them. Required: a) Explain clearly what is meant by the agency problem and illustrate this with examples of how it can manifest itself within listed companies. (10 marks) b) Explain how executive share option schemes operate, why they are a common component of executive remuneration in listed companies and describe their potential drawbacks. (10 marks)
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