Firms must provide the right incentives if they are to get to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover. generally receive fixed payments regardless of how well the firm does, while earn higher returns when the firm's earnings are higher. Investments in ventures, that have great payoffs to stockholders if successful but threaten bankruptcy if they fail, create conflicts. In addition, the use of additional increases stockholder/debtholder conflicts. Consequently, bondholders attempt to protect themselves by including in bond agreements that limit firms' use of additional and constrain actions.