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    The document discusses corporate governance and the relationship between a board of directors, top management, and shareholders in determining a corporation's direction and performance. It also examines different theories around agency and stewardship as well as the roles and responsibilities of boards of directors.

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    Chapter - 2

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    84 views23 pages
    The document discusses corporate governance and the relationship between a board of directors, top management, and shareholders in determining a corporation's direction and performance. It also examines different theories around agency and stewardship as well as the roles and responsibilities of boards of directors.

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    The document discusses corporate governance and the relationship between a board of directors, top management, and shareholders in determining a corporation's direction and performance. It also examines different theories around agency and stewardship as well as the roles and responsibilities of boards of directors.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    84 views23 pages

    Chapter - 2

    Uploaded by

    waqas_baloch_1
    The document discusses corporate governance and the relationship between a board of directors, top management, and shareholders in determining a corporation's direction and performance. It also examines different theories around agency and stewardship as well as the roles and responsibilities of boards of directors.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 23

    CHAPTER 2

    Corporate
    Governance

    STRATEGIC MANAGEMENT & BUSINESS POLICY


    10TH EDITION
    THOMAS L. WHEELEN

    Prentice Hall, Inc. 2006

    J. DAVID HUNGER

    2-1

    Corporate Governance

    Prentice Hall, Inc. 2006

    2-2

    Corporate Governance

    The relationship among the board of


    directors, top management, and
    shareholders determining the direction
    and performance of the corporation

    Prentice Hall, Inc. 2006

    2-3

    Corporate Governance

    Role of Board
    Monitor
    Evaluate and influence
    Initiate and determine

    Prentice Hall, Inc. 2006

    2-4

    Board of Directors Continuum

    Prentice Hall, Inc. 2006

    2-5

    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
    boards corporation

    Prentice Hall, Inc. 2006

    2-6

    Agency Theory

    Agency Problem
    Objectives of owners & agents in conflict
    Difficult for owners to verify agent performance

    Risk Sharing Problem


    Owners & agents risk assessment in conflict

    Prentice Hall, Inc. 2006

    2-7

    Stewardship Theory

    Executives 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.

    Prentice Hall, Inc. 2006

    2-8

    Board of Directors

    When Outsiders can be considered Insiders


    Affiliated Directors
    Retired Directors
    Family Directors

    Prentice Hall, Inc. 2006

    2-9

    Board of Directors

    Codetermination
    The inclusion of a corporations employees on its
    board of directors

    Prentice Hall, Inc. 2006

    2-10

    Board of Directors

    Interlocking Directorates
    Direct Interlocking
    Indirect Interlocking

    Prentice Hall, Inc. 2006

    2-11

    Board of Directors

    Nominations & Elections


    Traditional Approach
    CEO invitation to membership
    Shareholders approval in annual proxy statement
    All nominees usually elected

    Prentice Hall, Inc. 2006

    2-12

    Board of Directors

    Nominations & Elections


    Staggered Board Approach
    Staggered terms of service/election

    Prentice Hall, Inc. 2006

    2-13

    Board of Directors

    Sarbanes-Oxley
    Code of Ethics
    Audit, Nominating, and Compensation
    Committees all outside directors

    Prentice Hall, Inc. 2006

    2-14

    Board of Directors

    Organization of the Board


    Size
    Charter & Bylaws Determination

    Prentice Hall, Inc. 2006

    2-15

    Board of Directors

    Corporate Governance
    Review & shaping of strategy
    Pressure for corporate performance
    Demand for executive stock ownership
    Outside directors increasing
    Impact of Sarbanes-Oxley

    Prentice Hall, Inc. 2006

    2-16

    Board of Directors

    Transformational leaders
    Change agents through vision for change

    Prentice Hall, Inc. 2006

    2-17

    Board of Directors

    Successful CEOs
    Strategic vision
    Passion for the company
    Strong communication
    charisma

    Prentice Hall, Inc. 2006

    2-18

    Board of Directors

    Executive Leadership
    Strategic vision
    Role model

    Prentice Hall, Inc. 2006

    2-19

    Board of Directors

    Executive Leadership
    Communication of performance standards
    Demonstrates confidence in abilities of followers

    Prentice Hall, Inc. 2006

    2-20

    Strategic Management Process

    Strategic Planning Staff


    Supports top management & business units in
    the strategic planning process

    Prentice Hall, Inc. 2006

    2-21

    Strategic Management Process

    Strategic Planning Staff


    Identify & analyze company-wide strategic issues
    Generate strategic alternatives

    Prentice Hall, Inc. 2006

    2-22

    Strategic Management Process

    Strategic Planning Staff


    Facilitate business units in coordinating activities
    related to strategic planning process

    Prentice Hall, Inc. 2006

    2-23

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