This document discusses corporate governance and the board of directors. It describes the relationship between the board, top management, and shareholders in determining the direction and performance of a corporation. The board monitors, evaluates, and influences the corporation, and initiates and determines its direction. The board is made up of inside directors who are executives of the firm and outside directors from other companies. The document also discusses agency theory, the roles of transformational leaders and executive leadership on the board.

1. MANAJEMEN
S T R A T E G I
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2. STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
Corporate Governance

3. Corporate Governance
The relationship among the board of directors, top
management, and shareholders – determining the
direction and performance of the corporation
Role of Board
–Monitor
–Evaluate and influence
–Initiate and determine

4. 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

5. 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
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.

6. Board of Directors
When Outsiders can be considered Insiders
–Affiliated Directors
–Retired Directors
–Family Directors

7. Board of Directors
Codetermination
–The inclusion of a corporation’s employees on its board
of directors
Interlocking Directorates
–Direct Interlocking
–Indirect Interlocking
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

8. Board of Directors
Sarbanes-Oxley
–Code of Ethics
–Audit, Nominating, and Compensation Committees all
outside directors
Organization of the Board
–Size
•Charter & Bylaws Determination
Corporate Governance
–Review & shaping of strategy
–Pressure for corporate performance
–Demand for executive stock ownership
–Outside directors increasing
–Impact of Sarbanes-Oxley

9. Board of Directors
Transformational leaders
–Change agents through vision for change
Successful CEO’s
–Strategic vision
–Passion for the company
–Strong communication
–charisma
Executive Leadership
–Strategic vision
–Role model
–Communication of performance standards
–Demonstrates confidence in abilities of followers

10. Strategic Management Process
Strategic Planning Staff
–Supports top management & business units in the
strategic planning process
–Identify & analyze company-wide strategic issues
–Generate strategic alternatives
–Facilitate business units in coordinating activities related
to strategic planning process