Three internal governance mechanisms

Senior Seminar in Business Administration BUS 499

Corporate Governance

Welcome to Senior Seminar in Business Administration.

In this lesson we will discuss Corporate Governance.

Please go to the next slide.

Objectives

Upon completion of this lesson, you will be able to:

Describe how corporate governance affects strategic decisions

Upon completion of this lesson, you will be able to:

Describe how corporate governance affects strategic decisions.

Please go to the next slide.

Supporting Topics

Separation of Ownership and Managerial Control

Ownership Concentration

Board of Directors

Market for Corporate Control

International Corporate Governance

Governance Mechanisms and Ethical Behavior

In order to achieve these objectives, the following supporting topics will be covered:

Separation of ownership and managerial control;

Ownership concentration;

Board of directors;

Market for corporate control;

International corporate governance; and

Governance mechanisms and ethical behavior.

Please go to the next slide.

Separation of Ownership and Managerial Control

What is Corporate Governance

Shareholders

Purchase stock

Managing of their investment risk

Agency Relationships

Problems

Different interests and goals

Managerial Opportunism

Agency Costs

To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisions are made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.

Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.