MGMT 490 Lecture Notes - Lecture 1: Strategic Management, Relativism
Lecture Notes 1 MGMT 490:
• Corporation
• 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)
• Setting corporate strategy, overall direction, and mission or vision
• Succession--hiring and firing the CEO and top management
• Controlling, monitoring, or supervising top management
• Reviewing and approving the use of resources
• 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
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