Corporate Governance: Roles & Relationships between Boards, Management, and Shareholders -, Study notes of Business Management and Analysis

Download Corporate Governance: Roles & Relationships between Boards, Management, and Shareholders - and more Study notes Business Management and Analysis in PDF only on Docsity! Corporate Governance Leon Schjoedt MQM 385 Chapter 2 2 Corporate Governance Corporate governance refers to the relationships between – board of directors, – top management, and – shareholders in determining direction and performance of corporation Board of Directors Continuum i¢— DEGREE OF INVOLVEMENT IN STRATEGIC MANAGEMENT ———__} Low (Passive) Never knows what to do, if anything; no degree of involvement. Permits officers to make all decisions. It votes as the officers recom- mend on action issues. Formally reviews Involved to a selected issues that officers bring to its attention. limited degree in the perfor- mance or review of selected key decisions, indicators, or programs of managment. Approves, questions, and makes final de- cisions on mis- sion, strategy, policies, and objectives. Has active board committees. Performs fiscal and manage- ment audits. High (Active) Takes the leading role in establishing and modifying the mission, objectives, strategy, and policies. It has a very active strategy committee. 6 The Board of Directors  Inside Directors – Management directors – Officers or executives employed in the corporation  Outside Directors – Non-management directors – Executive from other firms and are not employed by the corporation 7 Board of Directors’ Interests  Agency Theory – Agency problem – Risk-sharing problem  Sarbanes-Oxley Act  Steward Theory 10 Top Management  Strategic vision & executive leadership – Strategic vision  What the corporation is capable of becoming – Executive leadership  Directing activities to accomplish corporate objectives  Manage the strategic planning process 11 Strategic Management Styles Degree of involvement by board of directors D eg re e of in vo lv em en t by to p m an ag em en t Entrepreneurship management Chaos management Marionette management Partnership management Low Low High High