Suppose Deed Corporation evaluates managerial performance using return on investment. Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division. What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line

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Business

Hendrix

19 September, 08:05

Suppose Deed Corporation evaluates managerial performance using return on investment. Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division. What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line

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Oliver Rubio · Answer 1

Eddith Carolina could accept to take on the new cosmetic line, while Michael Sanders may reject same.

Explanation:

Eddith Carolina, been the president of the company, has shown that he's a risk taker. The idea behind this is that he is open to new opportunities that could otherwise improve his holdings and networth. The decision to take on a new cosmetic line is therefore in line with the policy of the President of the company. The implication is that Eddith Carolina is tilted to accepting the proposal.

Michael Sanders, on the other hand, is an ordinary employee. Even though he is the manager of the division, he bears no risk of ownership. And in an event of liquidation or solvency, he simply has no big collateral to part with, unlike the Eddith Carolinas. What individual like Michael Sanders are interested in is the protection of their job and income. Knowing the nature of an employee as conservative and risk averse and the fear of not loosing their paid job, it is therefore not surprising that Michael Sanders could reject the new cosmetic line bid.