MGMT 386 Lecture Notes - Lecture 9: Strategic Management, Relativism
A mechanism established to allow different parties to contribute capital, expertise, and labor for their
mutual benefit.
Corporate Governance
The relationship among these three groups: boards of directors, management, and shareholders, in
determining the direction and performance of the corporation.
Five Board of Directors' Responsibilities (listed in order of importance)
1) Setting corporate strategy, overall direction, and mission or vision
2) Succession--hiring and firing the CEO and top management
3) Controlling, monitoring, or supervising top management
4) Reviewing and approving the use of resources
5) Caring for stockholder interests
Board of Directors' Continuum
Depicts the possible degree of involvement (from low to high) in strategic management. It depends on
how involved the Board is in the three tasks of monitoring, evaluation and influencing, and initiating and
determining.
Inside Directors
Officers or executives employed by the corporation.
Outside Directors
May be executives of other firms but are not employees of the board's corporation.
Agency Theory
Problems arise in corporations because the agents (top management) are not willing to bear
responsibility for the decisions unless they own a substantial amount of stock in the corporation.
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Document Summary
A mechanism established to allow different parties to contribute capital, expertise, and labor for their mutual benefit. The relationship among these three groups: boards of directors, management, and shareholders, in determining the direction and performance of the corporation. Depicts the possible degree of involvement (from low to high) in strategic management. It depends on how involved the board is in the three tasks of monitoring, evaluation and influencing, and initiating and determining. May be executives of other firms but are not employees of the board"s corporation. Problems arise in corporations because the agents (top management) are not willing to bear responsibility for the decisions unless they own a substantial amount of stock in the corporation. Because of their long tenure with the corporation, insiders (senior executives) tend to identify with the corporation and its success. When two firms share a director or when an executive of one firm sits on the board of a second firm.
