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STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITIONTHOMAS L. WHEELEN J. DAVID HUNGERCHAPTER 2 Corporate Governance
Corporate Governance
Corporate GovernanceThe relationship among the board of directors, top management, and shareholders determining the direction and performance of the corporation
Corporate GovernanceRole of Board
Monitor
Evaluate and influence
Initiate and determine
Board of Directors Continuum
Board of DirectorsMembers --
Inside directorsmanagement directorsOfficers or execs employed by the firm
Outside directorsnon-management directorsExecs of other firms not employed by the boards corporation
Agency TheoryAgency Problem Objectives of owners & agents in conflictDifficult 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.
Board of DirectorsWhen Outsiders can be considered Insiders
Affiliated DirectorsRetired DirectorsFamily Directors
Board of DirectorsCodetermination
The inclusion of a corporations employees on its board of directors
Board of DirectorsInterlocking Directorates
Direct Interlocking
Indirect Interlocking
Board of DirectorsNominations & Elections
Traditional ApproachCEO invitation to membershipShareholders approval in annual proxy statementAll nominees usually elected
Board of DirectorsNominations & Elections
Staggered Board ApproachStaggered terms of service/election
Board of DirectorsSarbanes-Oxley
Code of Ethics
Audit, Nominating, and Compensation Committees all outside directors
Board of DirectorsOrganization of the Board
Size
Charter & Bylaws Determination
Board of DirectorsCorporate Governance
Review & shaping of strategyPressure for corporate performanceDemand for executive stock ownershipOutside directors increasingImpact of Sarbanes-Oxley
Board of DirectorsTransformational leaders
Change agents through vision for change
Board of DirectorsSuccessful CEOs
Strategic visionPassion for the companyStrong communicationcharisma
Board of DirectorsExecutive Leadership
Strategic visionRole model
Board of DirectorsExecutive Leadership
Communication of performance standardsDemonstrates confidence in abilities of followers
Strategic Management ProcessStrategic Planning Staff
Supports top management & business units in the strategic planning process
Strategic Management ProcessStrategic Planning Staff
Identify & analyze company-wide strategic issuesGenerate strategic alternatives
Strategic Management ProcessStrategic Planning Staff
Facilitate business units in coordinating activities related to strategic planning process
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