MGMT Chapter 12
What is Shared value creation framework?
a model proposing that managers have a dual focus on shareholder value creation and value creation for society
What is leverage buyout?
a single investor or a 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.
What is moral hazard?
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
What is adverse selection?
a situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives
What is corporate governance?
a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally
What is agency theory?
a theory that views the firm as a nexus of legal contracts
What is business ethics?
an agreed upon code of conduct in business, based on societal norms
What is stock options?
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
What are inside directors?
board members who are generally part of the company's senior management team: appointed by the shareholders to provide the board with necessary information pertaining to the company's internal workings and performance
What are outside directors?
board members who are not employees of the firm but who are frequently senior executives from other firms or full time professionals
What is poison pill?
defensive provisions to deter hostile takeovers by making the target firm less attractive
What is shareholder capitalism?
shareholders-the providers of the necessary risk capital and the legal owners of public companies have the most legitimate claim on profits
What is CEO/chairperson duality?
situation where the CEO of a publicly traded company is also the chairperson of the board of directors
What is board of directors?
the centerpiece of corporate governance composed of inside and outside directors who are elected by the shareholders