The document discusses corporate governance and strategies for maximizing shareholder wealth. It notes that while managers are tasked with pursuing strategies in the best interest of shareholders, their personal goals may instead prioritize job security, power, and salary. A number of governance mechanisms aim to ensure managers do not pursue self-interest over shareholders, including stockholder meetings, boards of directors, and stock-based compensation linking manager pay to share price. The takeover market also constrains managers from underperforming financially. Strategic decisions have ethical dimensions, and companies should establish ethical climates through leadership, mission statements, and incentive systems. When evaluating strategies, managers should consider stakeholder impacts, moral principles, and long-term profit versus other concerns
Senior Seminar in Business Administration BUS 499Corporate.docxedgar6wallace88877
Senior Seminar in Business Administration
BUS 499
Corporate Governance
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
Supporting Topics
Separation of Ownership and Managerial Control
Ownership Concentration
Board of Directors
Market for Corporate Control
International Corporate Governance
Governance Mechanisms and Ethical Behavior
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
Separation of Ownership and Managerial Control
What is Corporate Governance
Shareholders
Purchase stock
Managing of their investment risk
Agency Relationships
Problems
Different interests and goals
Managerial Opportunism
Agency Costs
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisions are made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agency relationship. An agency re.
BUS 499, Week 8 Corporate Governance Slide #TopicNarration.docxcurwenmichaela
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep.
BUS 499, Week 8 Corporate Governance Slide #TopicNarrationVannaSchrader3
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep ...
Home Learning Week 81.) What is Corporate Social ResponsibilitSusanaFurman449
Home Learning Week 8
1.) What is Corporate Social Responsibility and why are companies engaged in it?
2.) Discuss the evolving phases of Corporate Social Responsibility
3.) Describe Carroll’s four-part definition of CSR and contrast it to Firedman’s “the business of business is business”
4.) Discuss why companies are engaged in Corporate Social Reporting
Senior Seminar in Business Administration
BUS 499
Corporate Governance
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
Supporting Topics
Separation of Ownership and Managerial Control
Ownership Concentration
Board of Directors
Market for Corporate Control
International Corporate Governance
Governance Mechanisms and Ethical Behavior
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
Separation of Ownership and Managerial Control
What is Corporate Governance
Shareholders
Purchase stock
Managing of their investment risk
Agency Relationships
Problems
Different interests and goals
Managerial Opportunism
Agency Costs
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisions are made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage ...
Senior Seminar in Business Administration BUS 499Corporate.docxedgar6wallace88877
Senior Seminar in Business Administration
BUS 499
Corporate Governance
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
Supporting Topics
Separation of Ownership and Managerial Control
Ownership Concentration
Board of Directors
Market for Corporate Control
International Corporate Governance
Governance Mechanisms and Ethical Behavior
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
Separation of Ownership and Managerial Control
What is Corporate Governance
Shareholders
Purchase stock
Managing of their investment risk
Agency Relationships
Problems
Different interests and goals
Managerial Opportunism
Agency Costs
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisions are made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agency relationship. An agency re.
BUS 499, Week 8 Corporate Governance Slide #TopicNarration.docxcurwenmichaela
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep.
BUS 499, Week 8 Corporate Governance Slide #TopicNarrationVannaSchrader3
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep ...
Home Learning Week 81.) What is Corporate Social ResponsibilitSusanaFurman449
Home Learning Week 8
1.) What is Corporate Social Responsibility and why are companies engaged in it?
2.) Discuss the evolving phases of Corporate Social Responsibility
3.) Describe Carroll’s four-part definition of CSR and contrast it to Firedman’s “the business of business is business”
4.) Discuss why companies are engaged in Corporate Social Reporting
Senior Seminar in Business Administration
BUS 499
Corporate Governance
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
Supporting Topics
Separation of Ownership and Managerial Control
Ownership Concentration
Board of Directors
Market for Corporate Control
International Corporate Governance
Governance Mechanisms and Ethical Behavior
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
Separation of Ownership and Managerial Control
What is Corporate Governance
Shareholders
Purchase stock
Managing of their investment risk
Agency Relationships
Problems
Different interests and goals
Managerial Opportunism
Agency Costs
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisions are made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage ...
Students, digital devices and success - Andreas Schleicher - 27 May 2024..pptxEduSkills OECD
Andreas Schleicher presents at the OECD webinar ‘Digital devices in schools: detrimental distraction or secret to success?’ on 27 May 2024. The presentation was based on findings from PISA 2022 results and the webinar helped launch the PISA in Focus ‘Managing screen time: How to protect and equip students against distraction’ https://www.oecd-ilibrary.org/education/managing-screen-time_7c225af4-en and the OECD Education Policy Perspective ‘Students, digital devices and success’ can be found here - https://oe.cd/il/5yV
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
How to Split Bills in the Odoo 17 POS ModuleCeline George
Bills have a main role in point of sale procedure. It will help to track sales, handling payments and giving receipts to customers. Bill splitting also has an important role in POS. For example, If some friends come together for dinner and if they want to divide the bill then it is possible by POS bill splitting. This slide will show how to split bills in odoo 17 POS.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
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This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
Ethnobotany and Ethnopharmacology:
Ethnobotany in herbal drug evaluation,
Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
Role of Ethnopharmacology in drug evaluation,
Reverse Pharmacology.
1. CORPORATE GOVERNANCE AND
STRATEGY
Stockholders delegate the job of
controlling the company and determining
strategies to corporate managers, who
become the agents of the stockholders.
Accordingly, corporate managers should
pursue strategies that are in the best
interest of the stockholders and
maximize stockholder wealth.
2. Why should managers want to pursue other
strategies than those consistent with maximizing
stockholder wealth?
The answer depends on the personal goals of
professional managers. Many have argued that
managers are motivated by desires for status,
power, job security, income, and the like. By
virtue of their position within the company,
certain managers, such as the CEO, can use their
authority and control over corporate funds to
satisfy these desires.
3. Economists have termed such behavior
“on-the-job consumption.”
However, given that some managers put
their own interests first, the problem facing
stockholders is how to govern the
corporation so that managerial desires for
on-the-job consumption, excessive
salaries, or empire-building diversification
are held in check.
4. A number of governance mechanisms,
which include stockholder meetings, the
board of directors, stock-based
compensation schemes, the takeover
market, and leveraged buyouts, etc
perform this function.
5. Stockholders Meetings
These meetings provide a forum in which
stockholders can voice their approval or
discontent with management. In theory,
at such meetings stockholders can
propose resolutions that, if they receive a
majority of stockholder votes, can shape
management policy, limit the strategies
management can pursue, and remove
and appoint key personnel.
6. The role of the Board
Stockholder interests are looked after within the
company by the board of directors.
Board members are directly elected by
stockholders, and under corporate law the
board represents the stockholders' interests in
the company.
Its position at the apex of decision making
within the company allows the board to monitor
corporate strategy decisions and ensure that
they are consistent with stockholder interests.
7. The typical board comprises a mix of
insiders and outsiders.
Inside directors are required because they
have valuable information about the
company's activities. Without such
information the board cannot adequately
perform its monitoring function.
But since insiders are full-time employees
of the company, their interests tend to be
aligned with those of management.
8. Hence, outside directors are needed to
bring objectivity to the monitoring and
evaluation processes.
Outside directors are not full-time
employees of the company.
9. Stock-Based Compensation Schemes
To get around the problem of captive
boards, stockholders have urged many
companies to introduce stock-based
compensation schemes for their senior
executives.
These schemes are designed to align the
interests of managers with those of
stockholders.
10. In addition to their regular salary, senior
executives are given stock options in the
firm. Stock options give managers the right
to buy the company's shares at a
predetermined price, which may often turn
out to be less than the market price of the
stock.
The idea behind stock options is to motivate
managers to adopt strategies that increase
the share price of the company, for in doing
so they will also increase the value of their
stock options.
11. The Takeover Constraint and Corporate Raiders
If the management pursues strategies and takes
actions inconsistent with maximizing stockholder
wealth. Stockholders, however, still have some
residual power, for they can always sell their
shares.
If they start doing so in large numbers, the price
of the company's shares will decline. If the share
price falls far enough, the company might be
worth less on the stock market than the book
value of its assets, at which point it may become
a takeover target.
12. The risk of being bought out is known as
the takeover constraint. The takeover
constraint effectively limits the extent to
which managers can pursue strategies
and take actions that put their own
interests above those of stockholders.
13. Poison Pills and Golden Parachutes
One response by management to the
threat posed by takeovers has been to
create so-called poison pills. The purpose
of a poison pill is to make it difficult for a
raider to acquire a company.
The poison pill devised by Household
International in 1985 is typical.
14. The management of the Household
International unilaterally add premium to
the existing market price of their stocks
already in the secondary market. This
helped the company nullify any takeover
constraint.
15. Another response to the threat posed by
takeovers has been the increasing use of
golden parachute contracts.
Golden parachutes are severance contracts
that handsomely compensate top-level
managers for the loss of their jobs in the
event of a takeover.
16. Leveraged Buyouts
The LBO is a special kind of takeover. In an LBO a
company's own executives are often (but not
always) among the buyers. The management
group undertaking an LBO typically raises cash
by issuing bonds and then uses that cash to buy
the company's stock.
Thus LBOs involve a substitution of equity for
debt. In effect, the company replaces its
stockholders with creditors (bondholders),
transforming the corporation from a public into
a private entity.
17. The difference is that as stockholders they were
not guaranteed a regular dividend payment
from the company; as bondholders they do
have such a guarantee.
18. STRATEGY AND ETHICS
Strategic decisions have ethical dimensions
Shaping the Ethical Climate of an Organization
To foster awareness that strategic decisions have
an ethical dimension, a company must
establish a climate that emphasizes the
importance of ethics. This requires at least
three steps.
First, top managers have to use their leadership
position to incorporate an ethical dimension
into the values that they stress.
19. Second, ethical values must be
incorporated into the company's mission
statement.
Third, ethical values must be acted on. Top
managers have to implement hiring,
firing, and incentive systems that
explicitly recognize the importance of
adhering to ethical values in strategic
decision-making.
20.
21. Besides establishing the right kind of
ethical climate in an organization,
managers must be able to think through
the ethical implications of strategic
decisions in a systematic way. A number of
different frameworks have been suggested
as aids to the decision-making process.
The four-step model shown in the above
Figure is a compilation of the various
approaches recommended by several
authorities on this subject.
22. In step I evaluating a proposed strategic decision
from an ethical standpoint—managers must
identify which stakeholders the decision would
affect and in what ways.
Most importantly, they need to determine if the
proposed decision would violate the rights of
any stakeholders.
The term right refers to the fundamental
entitlements of a stakeholder.
For example, one might argue that the right to
information about health risks in the workplace
is a fundamental entitlement of employees.
23. Step 2 involves judging the ethics of the
proposed strategic decision, given the
information gained in step 1.
This judgment should be guided by various
moral principles that should not be
violated. The principles might be those
articulated in a corporate mission
statement or other company documents
(such as Hewlett-Packard's The HP Way).
24. In addition, there are certain moral principles
that we have adopted as members of
society—for instance, the prohibition on
stealing—and these should not be violated.
The judgment at this stage will also be
guided by the decision rule that is chosen
to assess the proposed strategic decision.
25. Although long-run profit maximization is
rightly the decision rule that most
companies stress, this decision rule should
be applied subject to the constraint that no
moral principles are violated.
26. Step 3, establishing moral intent, means
that the company must resolve to place
moral concerns ahead of other concerns
in cases where either the rights of
stakeholders or key moral principles have
been violated.
Step 4, requires the company to engage in
ethical behavior.
27. Corporate Social Responsibility
Corporate social responsibility is the sense of
obligation on the part of companies to build
certain social criteria into their strategic
decision-making.
The concept implies that when companies
evaluate decisions from an ethical
perspective, there should be a presumption in
favour of adopting courses of action that
enhance the welfare of society at large.
28. Social Responsibility:
The set of obligations an organization has to
protect and enhance the society in which it
operates.
Continuum of Social Responsibility :
The four stances company can take concerning
their obligations to society fall along a
continuum ranging from lowest to the
highest degree of socially responsible
practices.
30. Social Obstruction : An approach to social
responsibility in which firms do as little as
possible to solve social or environmental
problems.
Social Obligation: A social responsibility
approach in which an organization will do
everything that is required of it legally but
nothing more.
31. Social response: A social responsibility
approach in which an organization meets its
basic legal and ethical obligations and also
goes beyond social obligation in selected
areas.
Social contribution: A social responsibility
approach or stance in which an organization
views itself as a citizen of the society and
proactively seeks opportunities to contribute
to that society.