Frank T. Rothaermel -- Strategic Management 3e -- Chapter 12

Shared Value Creation Framework

A model proposing that mangers have a dual focus and shareholder value creating and value creation for society

Corporate Governance

A system of mechanisms to direct and control an enterprise in order to ensure that is pursues its strategic goals successfully and legally

Agency Theory

The theory that views the firm as a nexus of legal contracts

Adverse Selection

A situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives

Moral Hazard

A situation in which information asymmetry increases the incentive of one party to take undo risk or shirk other responsibility because the cost incur to the other party

Board of Directors

The centerpiece of corporate governance composed of inside and outside directors who are elected by the shareholders

Inside Directors

Board members who are generally part of the senior management team appointed by shareholders to provide the board with necessary information pertaining to the companies internal workings and performance

Outside Directors

Board members who are not employees of the firm but who are frequently senior executives from other firms or full-time professionals given their independence they are more likely to watch out for shareholder's interest.

Stockoptions

An incentive mechanism to align the interest of shareholders and managers by giving the recipient the right to buy a company stock at a predetermined price sometime in the future

Leveraged Buyout

A single investor or group of investors buys with the help of borrowed money leveraged against the companies assets the outstanding shares of a publicly traded company in order to take it private. The private owners will often restructure the company and take it public again.

Business Ethics

An agreed upon code of conduct in business based on societal norms.