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Theory questionWritten paper
Q7: Both ask for four ways to encourage managers to achieve stakeholder objectives: share options, performance-related pay, governance codes and listing rules, and monitoring. See the sections on agency theory and reducing the agency problem.
Q7, 15 marks: A chairman proposes to raise EPS by paying creditors late, postponing capital spending and freezing pay. You report on the effect on the share price and stakeholders, then give four ways to encourage managers to meet stakeholder aims. See the rules on objectives and the worked examples.
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Stakeholders, corporate social responsibility and ethics in financial management › Agency theoryStrategic financial management and corporate objectives › Corporate objectivesSource: ICAN Pathfinder, Professional Level Examination, Strategic Financial Management, November 2022