Pauli Exam 2

What are the components of corporate goverance

Exist when one party delegates decision making authority to a second party agent for compensation

Agency Relationships

Owners (principals) hire managers (agents) and give them authority to _____ (e.g., maximize the value, address a cause, etc

to act in their best interest. / make decisions on their behalf,

_____can result from different interests and goals. ◦ Principals

Self dealing or managerial opportunism

Costs incurred by principals, from or to enhance compliance of, agents

Agency Cost

Agency Cost face greater scrutiny due to

Various governance Acts

Rise of shareholder and class action lawsuits

What are some aspects of internal governance mechanisms

•Ownership Concentration

•Board of Directors

•Executive Compensation

What are some aspects of external mechanisms

Market for Corporate Control

Regulators

Creditors

What is the reason for separated control of ownership in governance mechanisms

Except in some firms

Small

Private

Family owned

What are large block shareholders?

shareholders with at least 5% of the shares

what is a controlling or majority shareholder?

A shareholder who owns more than 50% of the shares

What are the board of directors

elected individuals

they act in the best interest of the owner(s)

monitor and control the firms top level managers

what are the the different groups on the board of directors

related outsiders, unrelated outsiders, and insiders (Mgt)

What is executive compensation

As an internal governance mechanism, executive compensation—especially long-term incentive compensation—is complicated.

What are some aspects of executive compensation

Complex and non routine decisions

Difficult to separate the effects of unpredictable changes from decisions.

Managerial manipulation

Annual bonuses may provide incentives to pursue short-run objectives

Long-term incentives tie a manager in an inflexible way and may lead to overcompensation

What is the sarbanes oxley act 2002

Provides crucial protection for shareholders and members of the public, from fraud and significant accounting errors. Designed to improve visibility of corporate disclosures and to avoid inaccuracies

What is section 302

Covers safeguards designed to ensure that management certifies the accuracy of financial reports ◦

Internal procedures

Accurate financial disclosure

Material information to officers

Internal controls audit

What is section 404

Requires extensive internal controls (including security safeguards, disclosure of security breaches and failures) and reporting methods.

What is the Dodd Frank Act

Performance declines when ____

strategy doesn’t equal the appropriate structure and controls

Organizational structure specifics the firm’s

formal reporting relationships

procedures

controls

authority and decision-making processes

A firm’s structure determines and specifies:

Decisions that are to be made

Work that is to be completed within an organization as a result of those decisions

How the firm will cope with environmental uncertainty

Org Structure provides:

Structural stability

provides the capacity to consistently and predictably manage daily routines

Structural flexibility

makes it possible for the firm to identify opportunities and allocate resources

Modifications to current strategy or selection of a new strategy may call for changes to organizational structure.

Guide the use of strategy,

◦ Indicate how to compare actual with expected results

◦ Suggest corrective actions to take

What are the 2 types of organizational contorls

strategic and financial controls

What are strategic controls

Largely subjective ◦ Fit between - might do and can do ◦ Rich communications, analysis, thought, consideration, knowledge, understanding

What are Financial controls

Largely objective

◦ Established quantitative standards

◦ Previous outcomes

◦ Competitors’ performance

◦ Industry averages

What is a simple structure

Owner-manager makes all major decisions and

monitors all activities.

Some Characteristics include:

◦ Informal relationships

◦ Few rules

◦ Limited task specialization

◦ Unsophisticated in IT

What is a functional structure

Chief executive officer (CEO) with functional line

managers in functional areas

◦ Allows for functional specialization

◦ Can negatively affect communication and

coordination

◦ Creation of “silos”

What is a multidivisional structure (M-form)

Corporate office and operating divisions (separate businesses or profit centers)

More accurate monitoring of performance

Allows comparisons between divisions

Widely adopted

Supports implementation of related and unrelated diversification strategies

Describe the evolution of strategy and culture

What is leadership?

Someone who can influence others and who has authority

What do leaders “do”

The art of empowering and mobilizing others to want to accomplish a mutually agreed-upon goal while advancing the group’s integrity and morale

An influence relationship among leaders and followers who intend real changes and outcomes that reflect their shared purposes

describe the transition of class to new leadership styles

What is Fiedler’s Contingency Theory

a leader's effectiveness depends on the match between their personal leadership style and how favorable the situation is. Core premise is that a leader's fundamental style is fixed, so performance improves by placing leaders in situations that fit them—not by trying to change the leader.

Describe the LPC ranges and their meaning

What are the different practices of leaders

What are the 5 components of emotional intelligence

What are the leadership substitutes, neutralizers, and characteristics of leaders that don’t matter?

What is strategic leadership and style

Strategic leadership chart

What are characteristics of top management teams?

What is managerial succession

What are key strategic leadership actions

What are the 5 sources of Power?

A strategy’s success is a function of ___?

What is a competitor analysis

Describe the mover advantage

Describe organizational size

Describe cycle speed in the mkt

What are the 4 basic market models?

What are the stages of the industry life cycle

What is the embryonic stage

What is the growth stage

What is the shakeout stage

What is the mature stage

What is the decline stage?

What are the limitation of models for the industry analysis?