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SMMC_G5__[CS-4] Stakeholders and Governance, G5 Group member, Example:…
SMMC_G5__[CS-4] Stakeholders and Governance
Recent Developments
Two interlinked challenges
Over-emphasis on shareholders and their interests
Generating a higher return on equity
Over-emphasis on measurable short-term financial metrics
Primarily financial
Countermeasure
Broaden their mission
Corporate social responsibility
Sustainability goals
Paying attention to longrun impacts
Set the goal of being carbon neutral
Adopted performance measurement systems
Balanced scorecard
Customers
To provide a more holistic performance and health assessment
Operations
Organization
Financial metrics
The rise of ecosystem strategies
Core idea
As members of a business ecosystem
Comprising of various interacting organizations and individuals
Cooperation and partnership with others
Are especially important for the long-run success
Protection from shareholder
Poison pill provisions
Make it difficult and costly for shareholders to replace the company's management
Staying private
To shield it from the whims and pressures of the public financial markets
Unicorns
The availability of cheap funding
The desire on the part of company founders to avoid shareholder scrutiny
Dual class shares
Founders will serve as the guardians of the long-term interests of the company
To protect these long-term interests
Public firms
The hierarchical nature of a publicly traded company
State charter
Board of directers
Employees
Shareholders
Management
Managerial actions affect the economy
Accounting scandal
Global financial crisis
Routines for doing a stakeholder impact analysis
Who are our stakeholder
What are our stakeholder's 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
Companies have always operated within a nexus of different stakeholders
External stakeholders
Suppliers
Government
Customers
Community
Internal stakeholders
Shareholders
Bondholders
Employees
Board managers
Always depended on how they manage the interests of these different shareholders
The four characteristics
Transferability of investor interest
Legal personality
Limited liability for investor
Separation of ownership and control
Corporate Social Responsibility
Lv2 : Legal Responsibilities
Laws and regulations are society's codified ethics; define minimum acceptable standard
Lv1 : Economic Responsibilities
Gain and sustain competitive advantage
Lv3 : Ethical Responsibilities
Do what is right, just, and fair
Lv4 : Philanthropic Responsibilities
Corporate citizenship
Value creation framework
Bringing in non-consumers
Expanding the internal firm's value chains
Customer base
Corporate governance
Agency Problems
Recruitment of executives from outside the firm
Compensation heavily weighted toward stock options
Monitoring by institutional investors
Monitoring by boards of directors
Debt
Separate Chairperson and CEO
Internal control of multi-divisional
Takeovers
Corporate governance
Represents the relationship among stakeholders
Agency costs
Monitoring costs
Enforcement costs
Incentive costs
Individual financial losses
Mechanisms to direct and control a firm
Ensure the pursuit of strategic goal
Address the principal-agent problem
Fails
Accounting scandal
Global financial crisis
Bernard Madoff > Ponzi scheme
Information asymmetry
Insider information
Finish up the section
Adverse selection
Mispresentation of a job
Moral hazard
Difficulty to ascertain whether the agent gives his/her best
Agency theory
Firms need to design work tasks
Views a firm as a nexus
Relationship among shareholders
Managers
Legal contracts
Hierarchies
G5 Group member
國企三 邱品儒 Ｗilliam
國企三 陳智霖 ZHILIN
國企三 梁美好 Helen
國企三 陳孟傑 MJ
國企三 邱鈺翔 Zion
國企三 朱德鑫 Denny
Example: General Electric