Answer to Question #312971 in Microeconomics for dia

Question

1. Apple Corporation requires its top managers to own shares of stock in Apple equal in value to three times their annual salary. Explain what problem Apple is trying to solve with this requirement, and explain whether this requirement does indeed solve the problem.

Answer 1

The problem Apple is aiming to solve is the intense pressure from shareholders being anxious about the company's sliding stock price, growing cash pile and mounting competition.

This requirement will help solve the problem since it will help align management's interests more closely with shareholders' interests.The overall benefit will therefore be to the company since there will be no conflict of interest.