Professional Documents
Culture Documents
ADVANTAGE
PART IV
MONITORING AND CREATING
ENTREPRENEURIAL OPPORTUNITIES
Chapter 11
Corporate Governance
Corporate Governance
Key Terms
Corporate governance
Set of mechanisms used to manage
the relationships among stakeholders
and to determine and control the
strategic direction and performance of
organizations
Governance Mechanisms
Separation of Ownership
and Managerial Control
Ownership
Management
Founder-Owners
Family-Owned Firms
Modern Public Corporations
Shareholders
Professional Managers
Agency Relationships
Key Terms
Agency
relationship
opportunism
An Agency Relationship
Product Diversification
as an Agency Problem
compensation
employment risk
Interests of Shareholders
Increased
Reduced
value of firm
Key Terms
Agency
costs
Regulatory Oversight of
Corporate Governance
Dodd-Frank Provisions
Ownership Concentration
Key Terms
Ownership
concentration
block shareholders
Effects of Ownership
Concentration
Influence of
Institutional Owners
Key Terms
Institutional
owners
Influence of
Institutional Owners
Board of Directors
Key Terms
Board
of directors
Board of Director
Responsibilities
Classifications of Boards of
Directors Members
Outsider Directors
Problems with
Outsider-Dominated Boards
Background diversity
Board Effectiveness
Provide an independent
perspective on important
decisions
Executive Compensation
Key Terms
Executive
compensation
Executive Compensation
Issues
Relationship to performance
The Effectiveness of
Executive Compensation
The Effectiveness of
Executive Compensation
Performance-based (incentive)
compensation plans are imperfect in
their ability to monitor and control
managers.
Executive Compensation A
Question of Stock Issue
Effectiveness
Earnings manipulations
Risk taking
Repricing
Backdating
Key Terms
Market
Corrects suboptimal
performance relative to
competitors
Disciplines ineffective or
opportunistic managers
Hostile Takeover
Defense Strategies
International
Corporate Governance
Corporate Governance
in Germany
Corporate Governance
in Japan
The Firm
Capital Market
Stakeholders
The Firm
Product Market
Stakeholders
Organizational
Stakeholders
The Firm
Capital Market
Stakeholders
Product Market
Stakeholders
Organizational
Stakeholders
Corporate Governance
and Ethical Behavior
ETHICAL QUESTION
Do managers have an ethical
responsibility to push aside their own
values with regard to how certain
stakeholders are treated (i.e., special
interest groups) in order to maximize
shareholder returns?
ETHICAL QUESTION
What are the ethical implications
associated with owners assuming that
managers will act in their own selfinterest?
ETHICAL QUESTION
What ethical issues surround
executive compensation? How can
we determine whether top executives
are paid too much?
ETHICAL QUESTION
Is it ethical for firms involved in the
market for corporate control to
target companies performing at
levels exceeding the industry
average?
Why or why not?
ETHICAL QUESTION
What ethical issues, if any, do top
executives face when asking their
firm to provide them with a golden
parachute?
ETHICAL QUESTION
How can governance mechanisms be
designed to ensure against
managerial opportunism,
ineffectiveness, and unethical
behaviors?