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Chapter 10
Corporate Governance
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
©2000 South-Western College Publishing
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Competitiveness
Chapter 3
Internal
Environment
Chapter 2
External
Environment
The Strategic
Management
Process
Strategic Intent
Strategic Mission
Strategic
Competitiveness
Above Average
Returns
Feedback
Strategy Formulation
Chapter 4
Business-Level
Strategy
Chapter 5
Competitive
Dynamics
Chapter 6
Corporate-Level
Strategy
Chapter 8
International
Strategy
Chapter 9
Cooperative
Strategies
Chapter 7
Acquisitions &
Restructuring
Strategic
Actions
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Used in corporations to establish order between the firm’s owners and its top-level managers
Corporate Governance is a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations
Concerned with identifying ways to ensure that strategic decisions are made effectively
Corporate Governance
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Separation of Ownership and Managerial Control
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An agency relationship exists when:
Agency Theory
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Solution: Principals engage in incentive-based performance contracts, monitoring mechanisms such as the board of directors and enforcement mechanisms such as the managerial labor market to mitigate the agency problem
Agency Theory
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Risk
Level of Diversification
Manager and Shareholder Risk and Diversification
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Example: Boards of Directors have a fiduciary duty to shareholders to monitor management
Agency Theory
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Governance Mechanisms
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Governance Mechanisms
Ownership Concentration
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Governance Mechanisms
Board of Directors
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Recommendations for more effective Board Governance:
Governance Mechanisms
Board of Directors
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Governance Mechanisms
Executive Compensation
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Governance Mechanisms
Multidivisional Organizational Structure
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Governance Mechanisms
Market for Corporate Control
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Germany
International Corporate Governance
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Japan
International Corporate Governance
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Corporate Governance and Ethical Behavior
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