(Full paper is not needed. Just answers to the questions)
Suppose you decide (like Steve Jobs and
Mark Zuckerberg did) 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, 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
K. Briefly explain how regulatory agencies and
legal systems affect corporate governance.