Organizational Purpose

Question 1

Organizational Purpose: the issue of corporate mission

Answer 1

how to send the firm in a particular direction?

1. Corporate Mission
   - elements: organizational beliefs, - values, business definition
   - functions: direction, legitimization, motivation
2. Corporate Governance:
   - functions: forming function, performance function, conformance function
   - forms: board structure, board membership, board tasks

Question 2

Corporate Mission - elements

Answer 2

organizational purpose
why does the firm exist?

Organizational beliefs
What are driving ideas and assumptions?

organizational values
what is of fundamental importance?

business definition
where does the firm operate?

Question 3

corporate mission - functions

Answer 3

direction - defining the boundaries within which strategic choices and actions must take place

legitimization - shows to all stakeholder inside and outside the company that the firm is pursuing valuable activities in a proper way

motivation - inspiring individuals to work together in a particular way

Question 4

corporate governance - functions

Answer 4

forming function - shaping, articulating and communicating the fundamental principles that will drive the organization’s activities

performance function - support the strategy process with the intention of improving the future performance of the corporation

conformance function- ensuring corporate conformance (Übereinstimmung) to the stated mission and strategy

Question 5

corporate governance - two- vs. one-tier board structure

Answer 5

two-tier board
+ two different point of view on aspects
- slow down processes
- not so well informed about problematic facts

one-tier board
+ more involved in critical issues
+ processes are faster
- only one point of view

Question 6

Paradox of organizational purpose

Answer 6

profitability
to bet an attractive investment, a firm must earn a giver return on the shareholders’ equity than could be realized at a bank

responsibility
acting in the interest of others, even when there is no legal imperative

Question 7

perspectives of organizational purpose

Answer 7

shareholder value perspective
profitability, instruments, to serve owner, share price and dividends, getting agents to pursue principal’S interest, independent outside directors, means, individual, pursuing self-interest

stakeholder value perspective
responsibility, joint ventures, to serve all parties involved, satisfaction among stakeholders, stakeholder’s representation, end and means, individual and organizational pursuing joint interest