1. Define the following terms in a sentence each:
• Leveraged Buyout
• Downscoping
• Functional Structure
• Related Diversification
2. We have discussed the 2008 hostile takeover battle between Microsoft and Yahoo (read about it anywhere you like, for example at http://massivegreatness.com/turning-purple-into-red). Name two ways in which Microsoft hoped to benefit from the acquisition. Can Yahoo's perpetual raising of the price be considered a "poison pill"?
3. The following article on executive compensation suggests that some executives are earning nearly $40,000 an hour (http://www.nytimes.com/2014/04/13/business/executive-pay-invasion-of-the-supersalaries.html)! The following figure shows that much of the compensation comes from stock options, which is considered a good instrument of "corporate governance" (http://www.nytimes.com/interactive/2013/04/05/business/the-highest-paid-ceos.html; also see our ppt in the course documents section). The data is a few years old, but the trend toward overpayment of CEOs has remained stable, and even intensified as we move into 2017. Do you think such compensation is fair? Should we move away from a stock option model to a straight salary model for CEOs and top managers? Discuss the pros and cons of both.
4. Do takeovers work? Read the following article in the context of the controversy that surrounded HP's 2012 acquisition of Autonomy. Based on your experiences and other readings why do you think HP paid so much for Autonomy? Was it a doomed strategy, or was it a good idea that did not pan out? http://www.forbes.com/sites/robertsher/2012/11/28/the-lesson-of-h-p-for-mid-market-companies-with-acquisitions-really-do-your-homework/?ss=strategies-solutions
5. Read this article about activist shareholders pressurizing Yahoo:http://www.forbes.com/sites/adamhartung/2016/03/30/yahoo-case-study-in-why-activist-investors-exist-and-succeed/#30bee16728a6. Our discussion on corporate governance identified four mechanisms of corporate governance (ownership concentration, board of directors, executive compensation and the market for corporate control). Which two mechanisms are most apparent in this article? Elaborate.