9/18/2013

Corporate Governance
CORPORATE GOVERNANCE
AND
ETHICAL ISSUES

Corporation:
a mechanism established to allow different
parties to contribute capital, expertise and
labor for their mutual benefit
governed by the board of directors that
oversees top management with the
concurrence of the shareholders

Source: Wheelen and Hunger (2010)

Corporate Governance

Corporate Governance

Corporate Governance:
the relationship among the board of directors,
top management and shareholders in
determining the direction and performance of
the corporation (Wheelen and Hunger, 2010;
Dess et al., 2009)

Source: Dess et al. (2009), pp. 17

Corporate Governance
Separation of ownership with management
Agency Theory

Board of Directors
Responsibilities:
Setting up direction (eg. vision, mission, etc.) and
strategies
Appointing and removing top management,
particularly CEO
Controls, monitors, or supervises top management
Cares for shareholders interests
Assures that the corporation is managed in
accordance with state laws, security regulations and
conflict of interest situations

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Board of Directors
Criteria for a good director:
Willingness to challenge management when
necessary
Special expertise that is important to the company
Available for outside meetings to advise management
Expertise on global issues
Understands the firms key technologies and
processes
Brings external contacts that are potentially valuable
to the firm
Has detailed knowledge of the firms industry
Has high visibility in their field
Is accomplished at representing the firm to
stakeholders

Top Management
Responsibilities:
directing of activities toward the accomplishment of
corporate objectives
provide change and movement in an organisation by
providing a vision for change

Top Management
Highest ranking executives (with titles such as
chairman/chairwoman, chief executive officer, managing
director, president, executive directors, executive vicepresidents, etc.) responsible for the entire enterprise
(The Business Dictionary)
Top management translates the policy (formulated by
the BODs) into goals, objectives, and strategies, and
projects a shared-vision of the future. It makes decisions
that affect everyone in the organization, and is held
entirely responsible for the success or failure of the
enterprise (The Business Dictionary)
Involved with organisations day-to-day operation

Shareholder
Actual owner of a corporation/organisation
Monitor BODs and top management to ensure
desired path/direction has been followed
As the party who have interest in a
corporation/organisation

References:
Wheelen, T. L. & Hunger, J. D. (2010). Strategic Management
and Business Policy. (12th ed.). New Jersey: Prentice Hall
Dess, G., Lumpkin, G. T., & Eisner, B. A. (2009). Strategic
Management: Text and Cases (4th ed.). New York: McGraw Hill.
Pearce, John A. & Robinson, Richard B. (2009). Strategic
Management: Formulation, Implementation, and Control (11th
ed.). New York: McGraw Hill
http://www.businessdictionary.com/