385 Final Flashcards
ownership
basis of the modern corporation
managrial control
modern public corporation form leads to efficient specialization of tasks
agency relationships
shareholders (owners) hire managers (decision makers) which creates an agency relationship
product diversification as agency problem
increased size and relationship of size to managerial compnsation
agency costs
sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses
Governance mechanisms
principals may engage in monitoring behavior
boards of directors have fiduciary duty to shareholders
ownership concentration
relative amounts of stock owned by individual shareholders of institutional investors
board of directors
individuals responsible for representing a firm’s owners by monitoring top level managers
enhancing efectiveness of board of directors
more diversity
stronger internal management
more formal processes to evaluate performance
executive compensation
use of salary bonuses and longterm incentives to align managers and stakeholders interests
market for corporate control
lacks precision of internal governance mechanisms
managerial defense tactics
increase the cost of mounting a takeover
organizational structure
specifies the formal reporting relationships, procedures, controls and authority and decision making process
organizational control
guides the use of strategy
strategic controls
what the firm might do and what the firm can do
financial controls
accounting based measures (ROI and ROA) and market based measure (EVA)
functional structure
A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing
simple structure
Simple structure is a basic organizational design structure with low departmentalization, little work specialization, wide spans of control, centralized authority (typically the owner has most of the power) and little formalization or rules that govern operation.
multidivisional structure
In the multidivisional structure, each division typically contains only a partial set of value chain activities.
strategic leadership
multi-functional work involving working through others
role of top level managers
often use discretion when making strategic decisions and implementing strategies
top management teams
composed of the key managers who are responsible for selecting and implementing the firm’s strategies
managerial succession
organizations select managers and strategic leaders from internal and external managerial labor markets
organizational culture
complex set of ideologies, symbols and core values shared through the firm that influences the way business is conducted
