MGMT 3013 Ch. 12
Situation where the CEO of a publicly traded company is also the chairperson of the board of directors
CEO/chairperson duality
What are the three things to focus on within the share value creation framework?
Expand the customer base to bring in nonconsumers Expand traditional internal firm value chains to include more nontraditional partners Focus on creating new regional clusters
A situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives
adverse selection
A theory that views the firm as a nexus of legal contracts
agency theory
The centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders
board of directors
An agreed upon code of conduct in business, based on societal norms
business ethics
A system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally
corporate governance
Board members who are generally part of the company's senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance
inside directors
A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private
leveraged buyout (LBO)
A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party
moral hazard
Board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals
outside directors
Defensive provisions to deter hostile takeovers by making the target firm less attractive
poison pill
A model proposing that managers have a dual focus on shareholder value creation and value creation for society
shared value creation framework
Shareholders - the providers of the necessary risk capital and the legal owners of public companies - have the most legitimate claim on profits
shareholder capitalism
An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation( to buy a company's stock at a predetermined price sometime in the future
stock options
