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

image

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