Explanation

Forms of corporate governance provisions corresponding the stick and the carrot are:

Threat of removal: The threat of removal is the primary stick associated with selfish interest of managers in the company. In case a manager is making personal benefits out of the corporate resources and not working in the interest of shareholders, he/she is at the threat of removal either by the board of directors or by the affected shareholders. Moreover, such acts of the management can also lead to a hostile takeover which will cost them their jobs.
Compensation: Compensation is the main carrot awarded to the manager for value enhancement. A manager's compensation should be associated with the firm's performance rather than restricted to a fixed salary so that he/she is highly motivated in creating a higher value for the firm. Thus, enabling the wealth maximization approach by the managers; thereby, increasing the shareholder's value.

Verified Answer

The corporate governance provision that corresponds to stick is the threat of removal. A manager is at the threat of removal either by the board of directors or by affected shareholders when the manager works against the wealth of the firm or against the interest of the shareholders.
The corporate governance provision that corresponds to carrot is compensation. A manager should be compensated on creating a value for the firm.