CHAPTER 2 Flashcards
is a legal entity created by an individual or group of shareholders who have
ownership of the corporation( through shares of stocks issued by the corporation) to engage in
business activities.
• Are legal entities and are sometimes defined as “legal persons”.
Corporation
Corporations are allowed to perform
functions that humans make such as
-Buying and selling properties
-Owning copyrights
-Patents
-Trademarks
-And engaging in any business activities
-It has indefinite life span that can survive from generation to generation
-a company or organization that has legal rights and responsibilities. i.e. the right to make contracts and the responsibility to pay debts.
- is a responsible being in the eyes of the law and can be used for damages if the performance
of the agreement is not met.
Legal Entity
legal right to produce or sell something that have invented for a specific period of time
Patents
once registered, that same symbol or series of words cannot be used by any other organization.
Trademarks
Philippine corporations
• There is no minimum number of incorporators( directors)
• But shall not have more than 20 incorporators
• Each of the incorporators must have one share of stocks.
• Granted a perpetual corporate term( previously 50- year term)
• No Required subscribe/ paid-up capital and residency of incorporators
to keep with global standards.
• One Person Corporation ( OPC)
allows a single person to form a
corporation without board of directors or shareholders
One person corporation
is the system of rules ,practices and
processes by which a firm is directed and controlled.
Corporate governance
essentially involves balancing the interests of a
company’s many stakeholders, such as shareholders, senior
management executives, customers, suppliers, financiers, the
government, and the community.
Corporate governance
structures were put into place to protect the
various stakeholders of corporations and prevent corporate scandals
and or failures from happening.
Corporate governance
help guide a company’s decisions and play a big
part in deciding if the business will be successful. It provide a clear direction for
the company and help in setting priorities and goals, as well as making informed
decisions.
Business aims and objectives
provide a clear direction for the company and help in setting priorities and goals,
as well as making informed decisions.
Business aims and objectives
are the broad, general goals that summarize what a company
wants to achieve
Business aims
are specific, measurable targets that help a company
achieve its aims
Business objectives
defines the organization’s business, its objectives and how it will reach these objectives
Mission statement
outlines the company’s long-term goals and aspirations for the future in terms of its long-term growth and impact on the world
Vision statement
Business Objectives (Long Version)
•Objectives give the business a clearly defined target.
• These are Plans that can then be made to achieve
targets.
• This can motivate the employees.
•It also enables the business to measure the progress
toward its stated aims.
Business Objectives
Survival
Profit Maximization
Profit Satisfying
Sales Growth
a short-term object short-trembly for a small business just
starting out, or when a new firm enters the market or at a time of crisis.
Survival
try to make the most profit possible – most like to be
the aim of the owners and shareholders.
Profit Maximization
try to make enough profit to keep the owners
comfortable – probably the aim of smaller businesses whose owners do
not want to work longer hours.
Profit Satisficing
where the business tries to make as many sales as possible.
This may be because the managers believe that the survival of the business
depends on being large. Large businesses can also benefit from economies
of scale.
Sales Growth
organizations like the Co-op or the Body Shop
have objectives that are based on their beliefs on how one should treat the environment
and people who are less fortunate.
Ethical and Socially Responsible Objectives
are run to not only generate a profit but provide a service to
the public. This service will need to meet the needs of the less well-off in society or help
improve the ability of the economy to function: e.g. cheap and accessible transport
service.
Public Sector Corporations
that monitor or control private sector activities have objectives
that are to ensure that the business they are monitoring complies with the laws laid down.
Public sector organizations
their aims and objectives are led by the beliefs
they stand for
Charities and voluntary organizations
their objectives are to provide a service –
most private schools for instance have charitable status. Their aim is the enhancement of
their pupils through education.
Health care and Education Establishments
Alternative aims and objectives
Ethical and socially responsible objectives
Public sector corporations
Public sector organization
Health care and education establishments
Charities and voluntary organizations
Importance of business aims and objectives. Setting business aims and objectives is important for a couple of
reasons:
Clarity if Direction
Measure of Company’s Success
Increases Motivation
improves Decision Making
helping to prioritize efforts and
allocate resources effectively.
Clarity of Direction
allowing to track progress and make better decisions
Measure Company’s Success
of the employees, by helping them
understand long-term goals
Increase Motivation
process at all levels of the organization.
Improves Decision Making
Key Players In Corporate Governance
CEO
Chairman of the Board
Board of Directors
Shareholders
Stakeholders
is the person responsible for leading and managing
the entire organization in achieving its organizational goals. It is the
duty of the ____ to collaborate with the board for the overall
direction of the company.
CEO
of directors
should not only provide leadership of the board but also play an
important role in the governance practices of the company.
Chairman Of The Board
This is the best entity in steering the company’s
strategic direction and evaluating its performance. As a _____,
questions must be asked during board meetings to make sure
decisions made by the company will be for the best interest of the
company in the long term
Board of Directors
Considered owners of the company through their ownership/ holdings of stock shares, this group actively seeks to
maximize stock price increase over a period of time.
Shareholders
Any group of people who are affected by how a
corporation operates (i.e., employees, suppliers, government and
society among others).
Stakeholders
-Are individuals who have no connection with the company and are
free from any relationship which may be considered a conflict of
interest
Independent Director
Hold a particular executive position inside the organization, such as CEO or other senior executive position such as the vice president.
Executive Director
Directors that act as a group known as
a _______. Corporations also have officers who are appointed by and
receive their powers from the board.
board of directors
Duties of Directors
• Act in the best interest of those they serve
• Owe a duty of care to their corporation. Stays informed about corporate developments and makes informed decisions
• Be loyal to the corporation.
• Manage the corporation’s business and affairs and has the authority to exercise all of the corporation’s powers
• Responsible for making major business and policy decisions, and the officers are responsible for carrying out the board’s policies and for making the day-to-day
decisions
Corporate Officers and Their Duties
President
Vice President
Secretary
Treasurer
usually makes decisions on corporate policy and operations.
President
assumes the president’s function in his or her absence.
Also often be responsible for running part of the corporation’s business or
operations.
Vice President
makes and keeps the corporate books and records. This
includes keeping the records of directors’ and shareholders’ meetings and
the corporation’s stock record book. The _______ also has the authority
to send out notices to corporate meetings and keep a register of the
names and addresses of the stakeholders. The _______ also keeps the
corporate seal
Secretary
keeps the corporation’s money and is responsible for taxes,
financial reports, etc.
Treasurer
are formed because board work can be done
effectively. By focusing and discussing particular issues
separately from general board meetings, the time management of directors is optimized.
Committee
as a result of corporate meltdowns, this
committee has become a nonnegotiable aspect of good governance.
The main objective of this committee is to oversee accounting and
financial reporting processes and results. They make sure that
internal and external audits are carried out with integrity.
Audit Committee
Different Committee
Audit Committee
Remuneration Committee
Nomination Committee
this committee is responsible for
identifying compensation and benefit plans for directors and senior
executives through performance appraisals. Excessive compensation
packages during economic downturns or financial crises warrant a
closer investigation of the rationale behind said compensation.
Remuneration Committee
to assure an effective working board, the directors on board must be independent thinkers, including executive directors. The ____________ should nominate the right mix of board members to ensure objectivity, independence, and
expertise.
Nomination Committee
allows you to check your corporation’s compliance with your
rule book and the law.
Healthy Corporation Checklist
The checklist contains a list of questions to ask about your corporation.
— Each question has a tick
box to record your corporation’s compliance, helping you to identify the areas
that need attention
Healthy Corporation Checklist
Are individuals who are not part of the management but related to
a certain aspect of the company, such as being a supplier, family
representative, friend, adviser or shareholder
Non executive director
Effective Business Criteria
Smart
Measurable
Achievable
Reaslitic
Timebound
goal is well-defined, with a clear outcome in mind. It should answer the questions of what you want to achieve, who is involved, and where it will happen.
Specific
goal has clear criteria for success and a timeline for achieving it. This allows you to track your progress along the way
Measurable
goal is one that is possible to achieve given the resources and constraints you have.
Achievable
goal is one that is achievable and aligned with your overall vision and long-term objectives.
Realistic
goal has a clear timeline for completion, with a start and end date. This helps to provide motivation and a sense of urgency to achieve the goal.
Time bound
Importance of corporate governance
-it lays down the framework for creating long term trust between companies and the external providers of capital
-improves strategic thinking at the top by inducting independent directors who bring in experience
-enables better monitoring of risks
-limits liability of top management by modulating decision making process
-ensures integrity of reporting of financial figures
-helps provide a degree of confidence
Managed by directors and officers
Corporation
