SMMCG7[CS-4] Stakeholders and Governance
Public Firms
age of shareholder primacy
stakeholders
internal
external
customers,suppliers,government
shareholders,bondholders,employees,managers
whoever can be affected or affect the corporation
goal : maximize returns for shareholders
reinforced by the modern financial markets
high shareholders interest
Strategic management and the role of business in society
hierarchical of authority
public stock company：the bone of economic
four characteristics of public firms
bring on the detriment of other stakeholders
transferability of investor interest
legal personality
limited liability for investors
separation of ownership and control
owners of stock can buy / sell
shareholder
board of directors
state charter
management
employees
financial crises nowadays
accounting scandals
global financial crisis
lessons
real estate bubble burst
ethical business produces wealth
stakeholder management is needed
stakeholder impact analysis
step 3
step 4
step 2
step 5
step 1
Who are our stakeholders?
What are our stakeholders' interests and claims?
What opportunities and threats do our stakeholders present?
What economic, legal, ethical, and philanthropic responsibilities? do we have to our stakeholders?
What should we do to effectively address the stakeholder concerns?
Corporate Social Responsibility
Pyramid of CSR
Philanthropic Responsibilities
Corporate Citizenship
Ethical Responsibilities
Doing what is right and just fair
Legal Responsibilities
Laws and regulations define minimum standards
Economic Responsibilities
To gain and sustain competitive advantage
Its a value creation framework
The social responsibilities of a company is to maintain profit and stay in the rules of the game
Examples
China, Brazil, Germany, Italy, and Spain, with Spain being the most social responsibility oriented managers on average
United Arab Emirates mainly focused on making profits
Milton Friedman
What's your customer base, how are you bringing in non-consumers, expanding the internal firm's value chains
Corporate Governance
represents the relationships among the stakeholders that is used to determine and control the strategic direction and performance of the organization
Agency costs
the principal is the one paying to have something done
Its the sum of incentive costs, enforcement costs, monitoring costs and individual financial losses incurred by principals
Mcdonalds uses a mix of incentives, monitoring, and enforcement within their franchise contract as a way to try and get better performance
Mechanisms to control the firm
Ensure the pursuit of the strategic goals of the company
Address the principal agent problem
In conclusion, agency views the firm as a nexus of legal contracts
There are only two problems in asymmetric information
adverse selection problem
moral hazard problem
someone misrepresents their abilities to the employer
slacking or shirking or not putting in very much effort
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Mechanisms of corporate governance
Agency problem
compensation
monitoring by institutional investors
institution investor
seperate chairperson and CEO
recruitment of executives from outside the firm
Internal control of multidivisional
takeovers
monitor company
debut
board of directors
centerpiece of governance
inside and outside directors
group members
Sean 馬培凱
Jack 王柏淳
Sunday 鄭詠心
Ian 陳禹丞
Charlie劉志嘉
Barney張傑鑫