MIE 480 Chapter Notes - Chapter 11: Organizational Culture, Strike Price, Vertical Integration
20 Jul 2020
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Stockholders receive a return on investment from dividend payments and capital appreciation in the market value of a share. Participating in a market that is growing. Development of new markets through international expansion, vertical integration, or diversification. Deals with business relationship problems when decision-making authority is delegated from one person to another. Information asymmetry: agent has more information about the resources being managed than the principal. On-the-job consumption: describes the behavior of senior management"s use of company funds to acquire perks. Empire building - buying new businesses to increase the size of the company through diversification. Shaping the agents" behavior to act in accordance with the goals set. Developing mechanisms for removing agents who do not act in accordance with the goals. Outside directors: not full-time employees of the company. Provide objectivity to the monitoring and evaluation of processes. Stock options: right to purchase company stock at a predetermined price at some point in the future.
