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[CS-4] Stakeholders and Governance, Group2 Team members, State Charter,…

- - - - Compensation heavily weighted toward stock options
        
        executives have tons of stock options, which gave them the incentive to manipulate the market to get the stock price higher
      - Monitoring by institutional investors
        
        they have a large amount of investment in the organization, then they may monitor very closely
      - Monitoring by boards of directors
        
        boards of directors in charge of evaluating the CEO and it can also reducing agency cost
      - Debt
        
        minimize free cash flow
        
        grocery business
        
        low profit margin
        
        high-tech industry
        
        a huge amount of free cash flow
        
        minimizing agency cost is not the primary problem
      - Recruitment of executives from outside the firm
        
        executives be recruited by other company, and increased the performance or they manipulating the numbers
      - Separate chairperson and CEO
        
        grocery business
        
        focusing on minimizing agency cost and have a separation of CEO & chairperson
        
        high-tech industry
        
        it will slow them down to make rapid decision
      - Takeovers
        
        the market for corporate control
        
        The lower the stock price of a company, the more attract takeover becomes to those who believe that they can manage the company more efficiently
      - Internal control of multidivisional
        
        Division are competing with each other so that managers will care about the profitability metrics with their own division profitability
  - - - selecting, evaluating, and compensating the CEO
      - overseeing CEO succession plan
      - recently problematic at both HP and Apple
      - Providing guidance on executives and their compensation
      - reviewing, monitoring, and approving strategic initiatives
      - conducting a risk assessment and mitigation
      - ensuring a firm's audited financial statements
      - ensuring a firm's compliance with laws and regulations
    - - France
        
        Stakeholder capitalism
      - China
        
        State-owned enterprises
      - Germany
        
        Stakeholder capitalism
- - - - two interlinked challenges
        
        over-emphasis on shareholders and their interests
        
        over-emphasis on measurable short-term financial metrics
  - - - sustainability goals
      - balanced scorecard
        
        It incorporates the interests of multiple stakeholders and consideration of the long run health and success of the company
      - social responsibility
    - - Broad Ecosystem
        
        cooperation and partnership with others, which think of as stakeholders,are especially important for the long run success of companies
        
        Ex:Shopping malls,Google, Amazon, Facebook, Apple,Alibaba,Coursera
        
        All have created businesses where multiple other players interact with each other on their platform in order to create value
      - Companies have to carefully and consciously think about all the stakeholders need to bring together within ecosystem
        
        How to keep them committed
        
        How to balance their different interests and goals
        
        How to attract them
        
        How to ensure that the ecosystem as a whole continues to provide value and outcompete others
      - Introduced first in an article by James Moore in 1993
        
        Firm should not be viewed simply as members of an industry, but as members of a business ecosystem comprising of various interacting organizations and individuals such as suppliers and complementors,and even government entities and customers
    - - take the company private
        
        shield it from the whims and pressures of the public financial markets
        
        led to huge growth in the private equity industry
      - dual class shares
        
        Commonly found in founder-led companies allowing founders to maintain control while giving investors an opportunity to participate in the company’s growth
        
        The spectacular collapse of WeWork's, IPO, is a cautionary tale that these approaches to dealing with shareholder primacy may have significant downsides as well
        
        WeWork's largest investors, Soft Bank had to pay over a billion dollars to buy our founder CEO Adam Neumann's dual crosshairs
        
        gave him the majority of votes on the board in order to eventually take control of the company
        
        Soft Bank and other private investors likely made a huge loss on their investment.
      - poison pill provisions
        
        make it difficult and costly for shareholders to replace the company's management
        
        Ex:Netflix
        
        issue a large number of shares in the market if any shareholder acquired more than 10 percent stake in the company
        
        Carl Icahn, a well-known activist shareholder who had been buying up shares of Netflix and wanted the company to focus a lot more on short run profitability
- - - - Accounting scandals: Enron, WorldCom, Tyco...
      - Global financial crisis: real estate bubble burst
    - - Enron
        
        Deliberately manipulated energy in California to create energy shortages
      - Ethical business produces wealth, but unethical practices destroy it
  - - - Governments
      - Communities
      - Suppliers
      - Unions
      - Customers
      - General public
    - - Employees
      - Board members
      - Bondholders
      - Managers
      - Shareholders
  - - - The Board of Directors is responsible for all of the stakeholders in the corporation
    - - Owners of stock can buy and sell stock
    - - The residual claim in this call to shareholder
        
        Stockholders have ownership
      - Managers have control
        
        Will the managers act in the best interest of the shareholders?
- - - - relationships among the stakeholders
        
        determine and control the strategic direction
        
        performance of the organization
    - - the agent act in the interest of the principal or not
  - - - monitor the agent's behavior
    - - penalties for non-compliance
    - - provide the agent with more incentives
  - - - laws and regulations
        
        society's codified ethics
        
        minimum acceptable standard
    - - do what is right, just and fair.
    - - gain and sustain competitive advantage
    - - corporate citizenship
  - - - 1962, Milton Friedman
        
        economic responsibility
        
        the legal responsibility
    - - does CSR help build competitive advantage?
        
        depend on where you do business
      - example
        
        less interested in CSR
        
        United Arab Emirates
        
        Japan
        
        India
        
        more interested in CSR
        
        Brazil
        
        Germany
        
        China
  - - - including more non-traditional partners
      - focusing on creating new regional clusters
    - - firms can do well on making profits by doing good CSR
- - - - Employees