strategic management & business policy 13 th edition
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CHAPTER 2 Corporate Governance. STRATEGIC MANAGEMENT & BUSINESS POLICY 13 TH EDITION. THOMAS L. WHEELEN J. DAVID HUNGER. Corporate Governance. Corporate Governance. - PowerPoint PPT PresentationTRANSCRIPT
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STRATEGIC MANAGEMENT & BUSINESS POLICY13TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 2 Corporate Governance
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Corporate Governance
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Corporate Governance
The relationship among the board of directors, top management, and shareholders determines the direction and performance of the corporation.
Board
Management Shareholders
DeterminesCompanyDirection
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Corporate Governance
Role of Board
–Monitor
–Evaluate and influence
– Initiate and determine
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Board of Directors Continuum
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Board of Directors
Members --
– Inside directors• “management directors”• Officers or execs employed by the firm
–Outside directors• “non-management directors”• Execs of other firms not employed by the
board’s corporation
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Agency Theory
Agency TheoryAgency Problem –
–Objectives of owners & agents in conflict–Difficult for owners to verify agent performance
Risk Sharing Problem ––Owners & agents risk assessment in conflict
Stewardship TheoryExecutives more motivated to act in best interest of the corporation than their own self-interests. Theory that over time, senior executives tend to view corporation as extension of selves.
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Board of Directors
When Outsiders can be considered Insiders
–Affiliated Directors–Retired Directors–Family Directors
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Board of Directors
Codetermination
–The inclusion of a corporation’s employees on its board of directors
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Board of Directors
Interlocking Directorates
–Direct Interlocking
– Indirect Interlocking
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Board of Directors
Nominations & Elections
–Traditional Approach• CEO invitation to membership• Shareholders approval in annual proxy statement• All nominees usually elected
–Staggered Board Approach• Staggered terms of service/election
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Board of Directors
Sarbanes-Oxley
–Code of Ethics
–Audit, Nominating, and Compensation Committees all outside directors
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Board of Directors
Organization of the Board
–Size
• Charter & Bylaws Determination
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Board of Directors
A Board of Directors job is to provide corporate governance
–Review & shaping of strategy–Pressure for corporate performance–Demand for executive stock ownership–Outside directors increasing– Impact of Sarbanes-Oxley
On behalf of:Best for the:1. Stockholders2. Employees3. Management Team4. Society
Best for the:1. Management Team2. Stockholders3. Employees4. Society
Best for the:1. Society2. Employees3. Management Team4. Stockholders
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Board of Directors
Transformational leaders
–Change agents through vision for change
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Board of Directors
Successful CEOs usually display:
• Strategic vision• Passion for the company• Strong communication skills• Charisma
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Board of Directors
Executive Leadership
– Provides strategic vision– Serves as a role model–Clearly communicates performance standards–Demonstrates confidence in abilities of followers
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Strategic Management Process
Strategic Planning Staff
• Identifies & analyzes company-wide strategic issues
• Gathers outside information and viewpoints
• Generates strategic alternatives• Supports top management & business units in
the strategic planning process
• Facilitates business units in coordinating activities related to strategic planning process