CORPORATION

Most business enterprises that employ more than a few dozen

people are organized as corporations.
The overall purpose of corporation is to maximize the long term
return to the owners (shareholders).
A corporation is a mechanism established to allow different parties
to contribute capital, expertise and labor for their mutual benefit.
The investor/shareholders participates in the profits of the
enterprise without taking responsibility of the operations.
CORPORATE GOVERNANCE
The term corporate governance refers to the relationship
among various participants in determining the
direction and performance of the corporations.
The primary participants are:
-The shareholders
-The Management
-Board of Directors
RELATIONSHIP OF THE PARTICIPANTS

Management
(Headed by CEO)

Shareholders Board of Directors

(Owners)
RESPONSIBILITIES OF BOD
1. Setting corporate strategy, overall direction, mission
or vision
2. Hiring and firing the CEO and top management
3. Controlling, monitoring or supervising top
management
4. Reviewing and approving the use of resources
5. Caring for shareholders interests.
ROLE OF THE BOARD IN STRATEGIC
MANAGEMENT
Monitor acting through its committees, a board can keep abreast
of developments inside and outside the corporation, bringing to
managements attention developments it might have overlooked.
A board should at least carry out this task.
Evaluate and Influence A board can examine managements
proposals, decisions, and actions, agree or disagree with them,
give advise, offer suggestions, and outline alternatives. Active
board performs this task in addition to be monitoring one.
Initiate and determine A board can delineate a corporations
mission and specify strategic options to its management. Only
the most active boards take on this task in addition to the two
previous ones.
MEMBERS OF THE BOARD OF DIRECTORS
The board of most publicly owned corporations are
composed of both inside and outside directors.

INSIDE DIRECTORS are typically officers or executives

employed by the corporation.

OUTSIDE DIRECTORS may be executives of other firms

but are not employees of the boards corporation.
TRENDS IN CORPORATE GOVERNANCE
Boards are getting more involved not only in reviewing and evaluating company
strategy but also in shaping it.
Institutional investors, such as pension funds, mutual funds, and insurance
companies, are becoming active on boards and are putting increasing pressure
on top management to improve corporate performance.
Shareholders are demanding that directors and top managers own more than
token amounts of stock in the corporation. Stock is increasingly being used as
part of a directors compensation.
Non-affiliated outside directors are increasing their numbers and power in
publicly held corporations as CEOs loosen their grips on boards. Outside
members are taking charge of annual CEO evaluation.
Boards are getting smaller, not only because of the reduction in the number of
insiders but also because boards desire new directors to have specialized
knowledge and expertise instead of general experience.
THE ROLE OF TOP MANAGEMENT
The top management function is usually conducted by
the CEO of the corporation in coordination with the
COO or President, Executive Vice President, and Vice
Presidents of divisions and functional areas. Even
though strategic management involves everyone in
the organization, the board of directors holds top
management that is primarily responsible for the
strategic management of the firm.
RESPONSIBILITIES OF TOP MANAGEMENT
Top management responsibilities, especially those of the
CEO, involved getting things accomplished through
and with others in order to meet the corporate
objectives. Top managements job is thus
multidimensional and is oriented toward the welfare of
the total organization.
EXECUTIVE LEADERSHIP AND STRATEGIC
VISION
Executive leadership is the directing of activities
toward the accomplished of corporate objectives.
Executive leadership is important because it sets the
tone for the entire corporation.
Strategic Vision is a description of what the company is
capable of becoming. It is often communicated in the
mission statement. People in an organization want to
have a sense of mission, but only top management is
in the position to specify and communicate this
strategic vision to the general workforce.
3 KEY CHARACTERISTICS OF CEO
1. The CEO articulates a strategic vision for the corporation. the
CEO envisions the company not as it currently is, but as it can
become.

2. The CEO presents a role for others to identify with and to follow.
the leader sets an example in terms of behaviour.

3. The CEO communicates high performance standards and also

shows confidence in the followers abilities to meet these
standards. No leader ever improved performance by setting
easily attainable goals that provided no challenge.
STRATEGIC PLANNING STAFF
RESPONSIBILITIES:
1. Identify and analyse company wide strategic issues
and suggest corporate strategic alternatives to top
management.
2. Work as facilitators with business units to guide them
through the strategic planning process.
SOCIAL RESPONSIBILITY OF STRATEGIC
DECISION MAKERS
The concept of social responsibility proposes
that a private corporation has responsibilities
to society that extend beyond making a profit.
Strategic decisions often affect more than just
the corporations.
RESPONSIBILITIES OF A BUSINESS FIRM

What are the responsibilities of a business firm,

and how many of them must be fulfilled?

Milton Friedman and Archie Carroll offer two

contrasting views of the responsibilities of
business firms to society.
FRIEDMANS TRADITIONAL VIEW OF BUSINESS
RESPONSIBILITY
Friedman referred to the social responsibility of business
as a fundamentally subversive doctrine and stated
that:
There is one and only one social responsibility of
business to use its resources and engage in
activities designed to increase its profits so long as it
stays within the rules of the game, which is to say,
engages in open and free competition without
deception or fraud.
CARROLLS 4 RESPONSIBILITIES OF BUSINESS
1. Economic responsibilities of business organizations management are
to produce goods and services of value to society so that the firm can
repay its creditors and shareholders.
2. Legal responsibilities - are governments laws that management is
expected to obey. For example, U.S. business firms are required to hire
and promote people based on their credentials rather than to
discriminate based on non-job-related characteristics such as race,
gender, or religion.
3. Ethical Responsibilities of an organizations management are to follow
the generally held beliefs about behavior in a society. For example,
society generally expects firms to work with the employees and the
community in planning for layoffs, even though no law may require this.
The affected people can get very upset if an organizations management
fails to act according to generally prevailing ethical values.
CARROLLS 4 RESPONSIBILITIES OF BUSINESS
4. Discretionary responsibilities are the purely
voluntary obligations a corporation assumes. Examples
are philanthropic contributions, training the hard core
unemployed and providing for day care centers. The
difference between ethical and discretionary
responsibilities is that few people expect an organization
to fulfill discretionary responsibilities whereas many
expect an organization to fulfill ethical ones.
CORPORATE STAKEHOLDERS (ICE)
The concept that business must be socially responsible
sounds appealing until we as, Responsible to whom?

A corporations task environment includes a large

number of groups with interest in a business
organizations activities. These groups are referred to
as corporate stakeholders because they affect or are
affected by the achievement of the firms objectives.
BUSINESS ETHICS
Business ethics (also known as corporate ethics) is a form of applied
ethics or professional ethics that examines ethical principles and
moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the
conduct of individuals and entire organizations.

Some people joke that there is no such thing as business ethics

they call it an oxymoron a concept that combines opposite or
contradictory ideas.
MORAL RELATIVISM
Some people justify their seemingly unethical position by
arguing that there is no one absolute code of ethics
and that morality is relative. Simply out, moral
relativism claims that morality is relative to some
personal, social or cultural standard and that there is
no method for deciding whether one decision is better
than another.
KOLHBERGS 3 LEVELS OF MORAL
DEVELOPMENT:
1. The pre-conventional level is characterized by a concern for
self. Small children and others who have not progressed beyond
this stage evaluate behaviors on the basis of personal interest
avoiding punishment or quit pro quo.
2. The conventional level is characterized by considerations of
societys laws and norms. Actions are justified by an external
code of conduct.
3. The principled level is characterized by a persons adherence
to an internal moral code. The individual at this level looks
beyond norms or laws to find.
CODE OF ETHICS

Code of ethics specify how an organization

expects its employees to behave while on the
job. Developing code of ethics can be a useful
way to promote ethical behavior, especially for
people who are operating at Kolhbergs
conventional level of moral development.
GUIDELINES FOR ETHICAL BEHAVIOR
Ethics is defined as the consensually accepted standards of
behavior for an occupation, a trade or a profession. Morality, in
contrast is the precepts of personal behavior that are based on
religious or philosophical grounds. Law refers to formal codes
that permit or forbid certain behavior and may or may not enforce
ethics or morality.
1. Utilitarian approach this approach proposes that actions and
plans should be judged by their consequences. Utility does it
optimize the satisfaction of all stakeholders?
2. Individual rights approach this approach proposes that human
beings have certain fundamental rights that should be respected
in all decisions. Rights does it respect the rights of the
individuals involved?
GUIDELINES FOR ETHICAL BEHAVIOR
3. Justice approach this approach proposes that
decision makers be equitable, fair and impartial in the
distribution of costs and benefits to individuals and
groups. Justice is it consistent with the canons of
justice?