Chapter 9 Flashcards
strategic control
the process of monitoring and correcting a firm’s strategy and performance
traditional approach to strategic control
a sequential method of organizational control in which;
1) strategies formulated and top management sets goals
2) strategies are implemented
3) performance is measured against the predetermined goal set
informational control
a method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organizations goals and strategies and the strategic environment
behavioral control
a method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries
organizational culture
a system of shared values and beliefs that shape a company’s people, organizational structure, and control systems to produce behavioral norms
reward system
policies that specify who gets rewarded and why
boundaries and constraints
rules that specify behaviors that are acceptable and unacceptable
corporate governance
the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders (2) the management (3) the B.O.D.
corporation
a mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party
agency theory
a theory of the relationship between principals and their agents, with emphasis on two problems
1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents
2) the different attitudes and preferences toward risk of principals and agents
board of directors
group that a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners, or shareholders, of a corporation and intermediate between the shareholders and management
shareholder activism
Actions by the large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization
external governance control mechanisms
methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system
market for corporate control
an external control mechanism in which shareholders dissatisfied with a firm’s management sell their shares
takeover constraint
the risk to management of the firm being acquired by a hostile raider
