Chapt 1 Flashcards
is an organization that uses economic resources or inputs to provide goods or services to customers in exchange for money or other goods and services
Business
also known as single proprietorship, is a business owned by only one person who has complete control and authority of its own.
Sole proprietorship
is a business owned by two or more persons who bind themselves to contribute money or industry to a common fund with the intention of dividing the profits between themselves.
Partnership
is a business organization that has a separate legal personality from its owners.
Corporation
is a duly registered business organization owned by a group of individuals and is operated for their mutual benefit.
Cooperative
“A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.”
CORPORATION CODE OF THE PHIL., SEC. 2
a juridical person whose personality is separate and distinct from its owners.
Artificial being
existence through a charter or a grant from the state.
Created by operation of law
can continue to exist even in death, incapacity or insolvency of any stockholder or members
Right of succession
it is authorized to do activities within the purpose(s) of its creation, it has its own traits, and it operates based on what has been expressed provided in the charter including those that are considered incident to its existence as a corporation.
Powers, attributes and properties
STAKEHOLDERS OF A CORPORATION
- Management
- Creditors
- Shareholders or stockholders
- Employees
- Clients
- Government
- Public
PURPOSES OF A CORPORATION
- Early stage survival
- To increase profit
- To offer vital services to the general public
- To offer goods and services to the mass market
artificial or natural persons that are legally owners of the corporation
Shareholders
persons or entities that are holders of currently outstanding bond
Bondholders
the collegial body that exercises the corporate powers of all corporations formed under the Corporation Code
Board of Directors (BOD)
Duties of the BOD
See slide 11
have investment in other countries, but do not have coordinated products offerings in each. They are more focused on adapting their products and services to each individual local market.
Multinational Companies
operate in more than one country and have a centralized management system.
Multinational companies
have many companies around the world but do not have a centralized management system.
Transnational companies
enterprises which own or control production or service facilities outside the country in which they are based. They have a central corporate facility but give decision-making, R&D, and marketing powers to each individual foreign subsidiary.
Transnational corporations (TNC)
means the process of decision-making and the process by which decisions are implemented (or not implemented)
Governance
is the process by which corporations establish their rules and policies and implement and monitor them.
Governance
is the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long-term shareholder value, whilst taking into account the interests of other stakeholders
Corporate Governance
Corporate governance, in principles, refers to ____________________
the joint responsibility imposed on the BOD and management to protect shareholder rights and enhance shareholder value
refers to the system whereby shareholders, creditors and other stakeholders of a corporation ensure that management enhances the value of the corporation as it competes in an increasingly global market place
Corporate Governance
is concerned with holding the balance between economic and social goals and between individual and communal goals
Corporate Governance
FUNDAMENTAL OBJECTIVES OF CORPORATE GOVERNANCE
- Improvement of shareholder value
- Conscious consideration of the interest of other stakeholders
has a variety of important characteristics, and it can mean different things to different people. Groups and individuals that hold positions of power must have a sense of accountability and a mode of checks and balances if they want to govern successfully.
Good Governance
As it relates to corporations,_________________typically leads corporations to achieve their goals. In successfully fulfilling their mission and plans, corporations that embrace good corporate principles will enhance the company’s prosperity and find favor in the eyes of their shareholders.
Good governance
refers to the welfare in governance and improving the quality of governance. It enables the government to provide equal opportunities and fair delivery of goods and services to the people who are most marginal in society.
Good Governance
refers to mobilizing the people of a country in the best direction possible. It requires the unity of people in society and motivates them to attain political objectivity. In other words; it ensures proper utilization of all the resources of the state for its citizens which ensures sustainable development.
Good Governance
NINE MAJOR CHARACTERISTICS
of good governance
See slide 19
IMPORTANCE OF GOOD GOVERNANCE IN A STATE
- Economic development
- Social development
- Political development
WHY IS GOOD GOVERNANCE IMPORTANT?
- To preserve and strengthen stakeholders confidence.
- To provide the foundation for a high performing organization
- To ensure the organization is well placed to respond to a changing external environment.
BENEFITS OF GOOD GOVERNANCE
- Reduced vulnerability
- Marketability
- Credibility
- Valuation
is the connection between owners and managers.
Agency relationship
the conflict in agency relationship
principal-agent problem
The shareholders are the _____________
principals
The ___________________ are the agents
managers
refers to the costs of the conflict of interest between stockholders and management.
Agency cost
corporate expenditure that benefits management but costs the stockholders or expense that arise from the need to monitor management actions.
Direct agency costs
is a lost opportunity
indirect agency cost
suggests that the firm can be viewed as loosely defined contract between resource providers and the resource controllers.
Agency theory
argues that in the modern corporation, managerial actions sometimes depart from those required to maximize shareholder returns.
Agency theory
the benefits that could have accrued to the owners had the owners been the ones who exercised direct control of the corporation.
Agency Loss
is the harmony and alignment of goals of both the principal and the agent which is consistent with the overall objectives of the organizations.
Goal Congruence
does not take part in the executive function of the management team, not an employee of the company or connected with it in another way.
Non-executive directors
ROLES OF NON-EXECUTIVE DIRECTORS
- Developing strategy
- Establishing networks
- Monitoring of performance
- Audit
is a corporate officer principally accountable for managing the financial risks of the corporation.
Chief Financial officer (CFO)
is an essential component in the overall corporate governance system. They should be independent from the operational aspects of the company
Audit Committee
is a systematic process by which a competent, independent person objectively obtains and evaluates evidence regarding assertions about economic actions and events
Auditing
