Post on 17-Jan-2016
Corporate Governance
Strategic Control
• Strategic control the process of monitoring and correcting a
firm’s strategy and performance Informational, behavioral
Ensuring Informational Control
• Traditional control system1. strategies are formulated and top
management sets goals
2. strategies are implemented
3. performance is measured against the predetermined goal set
Traditional Approach to Strategic Control
• Most appropriate when Environment is stable and relatively simple Goals and objectives can be measured with
certainty Little need for complex measures of
performance
Contemporary Approach to Strategic Control
• Contemporary control system Continually monitoring the environments
(internal and external) Identifying trends and events that signal the
need to revise strategies, goals and objectives
Contemporary Approach to Strategic Control
Building a Strong and Effective Culture
• Organizational culture a system of shared values and beliefs that
shape a company’s people, organizational structures, and control systems to produce behavioral norms.
Characteristics of Effective Reward andEvaluation Systems
Evolving from Boundaries to Rewards and Culture
• System of rewards and incentives coupled with a strong culture Hire the right people Training plays a key role Managerial role models are vital Reward systems clearly aligned with
organizational goals and objectives
Role of Corporate Governance
• Corporate governance the relationship among various participants in
determining the direction and performance of corporations.
primary participants are the shareholders, the management, and the board of directors.”
The Modern Corporation
• Corporation A mechanism created to allow different
parties to contribute capital, expertise, and labor for the maximum benefit of each party.
Governance Mechanisms
• Board of directors a group that has a fiduciary duty to ensure
that the company is run consistently with the long-term interests of the owners, or shareholders, of a corporation and that acts as an intermediary between the shareholders and management.
Governance Mechanisms
• Shareholder activism actions by large shareholders, both
institutions and individuals, to protect their interests when they feel that managerial actions diverge from shareholder value maximization.
External Governance Control Mechanisms
• External governance control mechanisms methods that ensure that managerial actions
lead to shareholder value maximization and do not harm other stakeholder groups and that are outside the control of the corporate governance system.
External Governance Control Mechanisms
• Market for corporate control
• Auditors
• Banks and analysts
• Regulatory bodies
• Media and public activists