G3_[CS-4] Stakeholders and Governance
Public Firms
stakeholders
external
internal
unions
communities
governments
suppliers
general public
customers
bondholders
employees
shareholders
board members
managers
characteristics
transferability of investor interest
legal personality
limited liability for investors
separation of ownership and control
hierarchical of authority
State Charter
Shareholders
Board of Directors
Management
Employees
Role
have the responsibility for management
vote for the board of directors
has responsibility for the employees
in charge of the legal personality of corporation including all stakeholders
the rules of the game of the state
Ex : Delaware
have the most well-defined property rights of all the States to US
have less ambiguity about rules of the game when companies incorporate
ethical business procedures
positive impacts and produces wealth
negative impacts and destroy value in the economy
accounting scandals
global financial crisis
Ex : Enron, WorldCom, Tyco
Ex : real estate bubble burst
Stakeholder analysis
Who ?
What interests and claims ?
What opportunities and threats they present ?
What economic, legal, ethical,and philanthropic responsibilities we have ?
people who can be affected or affect the corporation
managers have to strike a balance between employees and shareholders' opinion
try to balance in a positive sense of a politician of polity to keep the organization together
make sure that might affect the most important stakeholder
What to do to effectively address their concerns ?
Corporate Social Responsibility
Pyramid of Corporate Social Responsibility.
Philanthropic
Corporate citizenship
Ethical
Do what is right, just and fair
Legal
define minimum acceptable standard
Economic
Gain and sustain competitive advantage
agency cost
example
McDonald & franchisee
Cost
incentive cost
provide the agent with more incentives
monitoring costs
the principal can monitor the agent's behavior more
enforcement cost
penalties for non-compliance
Problem
adverse selection problem
moral hazard problem
Value-creation framework
Expand customer base and bring in non-consumers
Expand internal firm value chains by including more non-traditional partners
Focus on creating new regional clusters
corporate governance
is the system of rules, practices, and processes by which a firm is directed and controlled.
need to balancing the interests of a company's stakeholders
does corporate social responsibility build competitive advantage in different country
more interested in CSR
less interested in CSR
United Arab Emirates, Japan, and India
China, Brazil, and especially Germany
represents the relationship between the stakeholders
G3 Group members
國企三 翁暐婷 Kristin
國企三 吳翊瑄 Amanda
國企三 蔣明慈 Esther
國企三 張瑋庭 Wei Ting
國企三 李家慧 Stephanie
國企三 吳承樺 Eric
Mechanisms of corporate governance
agency problems
definition
does the corporation operate in the interest of the stockholder
reason
the separation of ownership and control
solution
compensation heavily weighted toward stock options
Associate company performance with managers’ profits, making managers more attentive to company operations, but may cause managers to care too much about the company’s stock price and artificially increase stock prices
monitoring by institutional investors
Investors who own a large amount of the company’s stock will be very concerned about the company’s operations and produce a monitoring effect
debt
if have no free cashflow to play with so that going to make company focus on being efficient and not being wasteful
monitoring by boards of directors
The board of directors is responsible for evaluating the CEO and the top management team, which will increase the efficiency of the team
separate chairperson and ceo
recruitment of executives from outside the firm
Managers’ performance will affect their performance in the market for managers
internal control of multidivisional
Divide the company into a multi-department mode of operation, so that there is a sense of competition between departments and improve work efficiency
takeovers
if company don't keep the stock price at a certain level,there's the threat that they may be taken over
centerpiece of corporate governance-inside and outside directors
general strategic oversight and guidance
Select and evaluate the CEO
providing guidance on executives and their compensation
Supervision and audit strategic initiatives
conducting a risk assessment
Confirm the company's financial statements
Confirm whether the company's specifications are legal