MGT 4335 Chapter 2

Corporation

is a mechanism established to allow different parties to contribute capital, expertise, and labor for their mutual benefit.

Inside Directors (management Directors)

Typically officers or executives employed by the corporation.

Outside Directors (non-management Directors)

may be executives of other firms but are not employees of the board's corporation.

Board of director responsabilities

-Effective Board Leadership -Strategy of the Organization -Risk vs initiative and overall risk profile of the organization. -Succession planning for the board and the top management team -Sustainability

Stewardship Theory

process that because their long tenure with the corporation, insiders (senior executives) tend to identify with the corporation and its success.

Top Management responsibilities

Executive Leadership; activities towards the accomplishment of corporate objectives. Strategic vision a description of what the company is capable of becoming.

Agency Theory

States that problems arise in corporations because the agents (top management ) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.

Strategic vision

description of what the company is capable of becoming.

Corporate Governance

refers to the relationship among these three groups, board of directors, top management and shareholders, in determining the direction and performance of the corporation.

Sarbanes Oxley Act

Acted that protects shareholders from the exesses and failed oversight that characterized criminal activities.

Role of the board of directors in strategic management

Monitor: By acting through committees Evaluate and Influence: Examine management proposals, decisions. More active boards perform this in addition to monitoring. Initiate and determine: A board can delineate a corporation's mission and specify strategic options to its management.

Members of a board of directors

Most publicly owned corporations are composed of both: Inside Directors and Outside Directors

Board of Directors

One of the most important responsibilities that the board of director has is to effectively recruit and work with management that will lead the business. Also they approve all decisions that might affect the long term performance of the corporation.