CH 2. Corporate Governance
Corporate governance - answer the relationship among board of directors, top
management, and shareholders in determining the direction and performance of a
corporation
board of directors responsibilities - answer commonly agreed obligations of directors,
which include: setting corporate strategy, overall direction, mission or vision; hiring and
firing the CEO and top management; controlling, monitoring, or supervising top
management; reviewing and approving the use of resources; and caring for shareholder
interest
due care - answerthe obligation of the board of members to closely monitor and
evaluate top management
board of directors' continuum - answera range of the possible degree of involvement by
the board of directors (from low to high) in the strategic management process
inside director - answeran officer or executive employed by a corporation who serves on
that company's board of directors; also called management director
outside directors - answermembers of a board of directors who are not employees of
the board's corporation; also called non-management directors
agency theory - answera theory stating that problems arise in corporations because the
agents (top management) are not willing to bear responsibility for their decisions unless
the own a substantial amount of stock in the corporation
stewardship theory - answera theory proposing that executives tend to be more
motivated to act in the best interest of the corporation than in their own self-interests
affiliated directors - answerdirectors who, though not really employed by the
corporation, handle the legal or insurance work for the company or are important
suppliers
retired executive directors - answerpast leaders of a company kept on the board of
directors after leaving the company
family directors - answerboard members who are descendants of the founder and own
significant blocks of stock
codetermination - answerthe inclusion of a corporation's workers on its board of
directors
Corporate governance - answer the relationship among board of directors, top
management, and shareholders in determining the direction and performance of a
corporation
board of directors responsibilities - answer commonly agreed obligations of directors,
which include: setting corporate strategy, overall direction, mission or vision; hiring and
firing the CEO and top management; controlling, monitoring, or supervising top
management; reviewing and approving the use of resources; and caring for shareholder
interest
due care - answerthe obligation of the board of members to closely monitor and
evaluate top management
board of directors' continuum - answera range of the possible degree of involvement by
the board of directors (from low to high) in the strategic management process
inside director - answeran officer or executive employed by a corporation who serves on
that company's board of directors; also called management director
outside directors - answermembers of a board of directors who are not employees of
the board's corporation; also called non-management directors
agency theory - answera theory stating that problems arise in corporations because the
agents (top management) are not willing to bear responsibility for their decisions unless
the own a substantial amount of stock in the corporation
stewardship theory - answera theory proposing that executives tend to be more
motivated to act in the best interest of the corporation than in their own self-interests
affiliated directors - answerdirectors who, though not really employed by the
corporation, handle the legal or insurance work for the company or are important
suppliers
retired executive directors - answerpast leaders of a company kept on the board of
directors after leaving the company
family directors - answerboard members who are descendants of the founder and own
significant blocks of stock
codetermination - answerthe inclusion of a corporation's workers on its board of
directors
