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Bus 478 > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

What are stakeholders

A

Individuals or groups with an interest in claims or stakes of the company and how well it performs

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2
Q

Who are included in stakeholders

A
  1. Stockholders
  2. Creditors
  3. Employees
  4. Customers
  5. Communities
  6. General Public
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3
Q

What are the stockholder expectations

A
  1. Stockholders want a return on their investments
  2. Creditors want to be repaid with interest
  3. Employees expect a good income
  4. Customers want a high quality and reliable products
  5. Suppliers seek for revenues and dependable buyers
  6. Government want a good businesss practice and fair competition
  7. Unions want benefits
  8. Communities want companies who are responsible
  9. General public wants quality of life to be improved
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4
Q

What is the stakeholder impact analysis

A

Enables a company to identify the stakeholders most critical to its survival and makes sure that the satisfaction of their needs are paramount

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5
Q

Who are the 3 critical stakeholderrs

A
  1. Customers
  2. Employees
  3. Stockholders
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6
Q

What are internal stakeholders

A

Stock holders and employees

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7
Q

What are external stakeholders

A

Individual groups that have some claim on the company (banks, bondholders, communities)

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8
Q

What are the role of stockholders

A

Legal owners and providers of risk capital

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9
Q

What does it mean to have a positing ROIC

A

Company is able to cover all of its ongoing expenses and have money left over to add to the shareholders equity

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10
Q

How do stockholders receive a return on their investment in a company’s stock

A

Dividends and capital appreciation

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11
Q

What has taken a significant importance in stockholders

A

Maximizing returns to stockholders because employees have become stockholders for their own company

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12
Q

What should management always strive for

A

Profit growth to maximize shareholder value

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13
Q

What are different ways to grow profits

A
  1. Increase margins earned on products and services
  2. Participate in a market that is growing
  3. Take market share from competitors
  4. Develop new markets through innovation, geographic expansion and diversification
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14
Q

What is the flow chart of value creation

A
  1. Willingness to pay - Customers
  2. Price (Interest, dividends, and retained earnings) - Capital Providers
  3. Costs ( Taxes, salaries, cogs) - Government, Employees and Suppliers
  4. Opportunity Cost
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15
Q

What is the agency theory

A

One party makes the decision making authority or control over resources to another

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16
Q

Who is the principal

A

Delegating authority

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17
Q

Who is the agent

A

Person that is being delegated

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18
Q

What is information asymmetry

A
  1. Problem arises if a principal and agent have different goals or if an agent takes action that is not in the best interest of the principal
  2. Agent tends to have more information than the principal
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19
Q

What is the agency problem

A

Misleading principals for personal gain, behave unethically or break laws or engage in behaviors that principles would never condone

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20
Q

What are on the job consumption

A

Behaviour of senior managements use of company funds to acquire perks

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21
Q

What are CEO pay packages

A

Making significantly more than average workers

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22
Q

What are empire building

A

Buying many new businesses to increase the size of the company through diversification to satisfy a desire for power, status, security and income

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23
Q

What are the 4 main types of governance mechanisms for aligning stockholder and management interests

A
  1. Board of Directors
  2. Stock Based Compensation
  3. Financial Statements
  4. Take over Constraint
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24
Q

What are the roles of Board of Directors in the corporate governance system

A
  1. They are the centerpiece of corporate governance system
  2. They are voted from stock holders
  3. Can legally be accountable for the companys action
  4. Monitors corporate strategies to ensure consistency with stockholders interest
  5. Legal authority to hire, fire and compensate corporate employees
  6. Responsible for companys audited financial statements
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25
Q

What are outside directors

A

Full-time, professional directors who hold positions on the boards of several companies and bring objectivity to monitor and evaluate processes

26
Q

What are the stock based compensations

A

Giving managers stock options to have the right to purchase company’s shares to predetermined price at some point in the future to help motivate managers to adopt strategies that increase share price

27
Q

What are the role of financial statements

A

To avoid misrepresenting financial information, the government requires all public companies to have their accounts audited

28
Q

What are the takeover constraints

A
  1. Risk of being acquired by another company and limits the extent which managers can pursue strategies and take actions that put their own interest above stockholders
29
Q

What happens when share price falls

A

Company will fall worthless and may become an attractive acquisition to target target

30
Q

What are stock options

A

The right to purchase the company’s shares at predetermined strike price at some point in the future

31
Q

Why do stockholders have residual power

A

They can sell their shares

32
Q

What is greenmail

A

The practice of buying enough shares in a company to threaten a takeover, forcing the company to buy them back at a high price

33
Q

How can the agency problem be reduced

A
  1. Strategic Control Systems
  2. Incentive Systems
34
Q

What is takeover constraint

A

Risk of being acquired by another company

35
Q

What are strategic control systems

A

Formal, target setting, measurement and feedback systems that allow managers to evaluate whether a company is executing the strategies necessary to maximize its long term profitability

36
Q

What is the purpose of strategic control systems

A
  1. What are establish standards and targets - performance can be measured
  2. Create systems to monitor and measure performance on a regular basis
  3. Compare actual performance against the established targets
  4. Evaluate results and take corrective action if necessary
37
Q

What is the balanced score card

A

Puts strategy and vision to establish goals and assumes that employees will adopt whatever behaviour and take whatever measures necessary to meet or exceed goals

38
Q

What does the balance scorecard measure

A
  1. Customer perspective
  2. Internal perspective
  3. Innovation and learning perspective
  4. Financial perspective
39
Q

What are positive incentive systems

A

Systems put in place to motivate employees to work towards goals that are central to maximize long term profits

40
Q

What are ethics

A

Accepted principles of right or wrong that govern the conduct of a person

41
Q

What are business ethics

A

Accepted principles of right and wrong governing the conduct of company employees

42
Q

What are the laws govern

A
  1. Product liability
  2. Contract and breaches of contract
  3. Protection of intellectual property
  4. Competitive Behaviour
  5. Selling of securities
43
Q

What are the different rights of stakeholders

A
  1. Stockholders: Timely and accurate information about their investment
  2. Customers: Be fully informed about the products and services they purchase
  3. Employees: Safe working conditions, fair compensations, treatment
  4. Competitors: Expect that the firm will abide by the rules of competition and not violate the basic principles of anti trust laws
  5. Communicate and the general public: Firm will not violate the basic expectations that society places on enterprises
44
Q

What are ethical dilemmas

A

Situations where there is no agreement over what the accepted principles of right and wrong are

45
Q

What is unethical behavior

A

Rises when managers decide to put the attainment other own personal or goals of the company

46
Q

What are the main conflicts faced between the goals of the enterprise

A

Goals of individual managers vs the fundamental rights of important stakeholders that must be respected

47
Q

What are examples of unethical behaviour

A
  1. Self dealing
  2. Information Manipulation
  3. Anti Competitive Behaviour
  4. Opportunistic exploitation
  5. Sustandard Working Conditions
  6. Environmental Degradation
  7. Corruption
48
Q

What is self dealing

A

Managers find a way to feather their own nests with corporate monies

49
Q

What is information manipulation

A

Managers use their control over corporate data to distort or hide information to enhance their financial situation

50
Q

What is anti competitive behaviour

A

Covers range of actions aimed to harm actual or potential competitors by using monopoly power

51
Q

What are the examples of anti competitive behaviour

A
  1. Predatory Pricing
  2. Price Fixing
  3. Dumping
  4. Dividing Territories
  5. Patent Abuse
  6. Rigging Bids
52
Q

What are opportunistic exploitation

A

Unethical behaviour that is used by managers to unilaterally rewrite the terms of a contract with suppliers, buyers or complement providers in a way that favors the firm

53
Q

What are exploitation

A

Managers seek unilaterally rewrite terms of contracts with buyers, suppliers or complement providers in a way that is favorable to the company often using their power to force a. revision to the contract

54
Q

What are substandard working conditions

A

Managers underinvesting in safe working conditions or pay employees below market rates

55
Q

What is environmental degradation

A

Companys action directly or indirectly results in pollution or other forms of environmental harm to violate the right of of local communities and general public

56
Q

What is corruption

A

Rise when manager pay bribes to gain access to lucrative business contracts

57
Q

What is bribery

A

Offering, promising, giving, accepting or soliciting an advantage as an inducement for an action which is illegal, unethical or breach of trust

58
Q

What are personal ethics

A

Generally accepted principles of right and wrong governing the conduct of individuals

59
Q

What are sources of not behaving ethically

A
  1. No personal ethics
  2. No incorporate ethical considerations
  3. Culture deemphasize business ethics and considers all decisions to be purely economic
  4. Pressure from top management
  5. Unethical Leadership
60
Q

How do managers behave ethically

A
  1. Hire people with well grounded sense of personal ethics
  2. Make sure leaders walk the talk
  3. Build a culture that places high value on ethical behaviour
  4. Put decision making processes in place that consider ethical dimensions
  5. use ethical officers
  6. Put strong governance in place
  7. Act with moral courage
61
Q

What are the code of ethics

A

Formal statement of the ethical priorities to which a business adheres

62
Q
A

Bus 478 (12 decks)

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